Timothy Ellsberry, an Atlanta-based custom home builder, is impressed with Home Depot’s latest AI-driven efforts to attract professionals. Ellsberry joined Home Depot’s Pro program in late 2024. He told CNBC he has reviewed but not yet adopted the company’s expanding suite of digital tools, including AI-powered BluePrint Takeoffs, launched in November. The tool quickly generates takeoffs – or comprehensive lists of materials and resources needed to complete project quotes – and allows contractors to purchase everything directly from Home Depot. “As they build their program, I see myself ditching the CRM (customer relationship management) that I’ve been using for a less expensive option because Home Depot creates those resources. They add it more or less for free on their platform,” said Ellsberry, 38, founder and lead developer of ERP Legacy Developments, which operates in Home Depot’s backyard. Home Depot is also headquartered in Atlanta. “When they add tools to our cart, it eliminates some of the additional costs that we have,” Ellsberry added, citing potential annual savings of $3,300 if he used Blueprint Takeoffs. As they build their program, I could see myself moving away from the CRM I use. Legacy Developments from ERP Timothy Ellsberry Amid a slower-than-expected housing market recovery that has put pressure on the stock, Home Depot has moved aggressively to capture pro dollars. The hidden gem of its 2024 acquisition of SRS Distribution, the Commercial Credit System, has allowed Home Depot to unlock a larger customer base of entrepreneurs. Trade credit allows entrepreneurs to purchase supplies and pay for them later. According to the company, integrating the power of AI into BluePrint Takeoffs can help professionals grow their businesses. “We can get things back to a customer in a day or two, whereas it often took us seven, eight days or more,” said Michael Rowe, executive vice president of Home Depot’s Pro business. “Your conversion opportunity increases. So if you’re looking for a marker, it would be around conversion, because that then leads to higher sales.” Rowe declined to share conversion metrics, but told CNBC that Home Depot was seeing a “nice uptick in engagement with the tool” as new takeoffs were made. “(We) certainly expect that conversion to improve,” he said. The real question, however, is whether or not Home Depot’s new tools will translate into higher margins for the home improvement retailer. Analysts are not convinced. “I don’t know if it necessarily helps with margin rates,” said Mizuho’s David Bellinger, adding that it depends on the category of items being sold. Home Depot’s margins have come under pressure. “In the third quarter, our gross margin was 33.4%, stable compared to the third quarter of 2024, which was in line with our expectations,” CFO Richard McPhail said during the company’s latest earnings conference call. For the full year 2025, the company sees growth of approximately 33.2%. Home Depot is expected to report its fourth-quarter financial results next month. According to Bellinger, big-ticket items that professionals typically buy in bulk – like lumber, building materials, concrete and even appliances – are low-margin products. Often, bulk purchases also receive discounts. However, Home Depot said the professional cohort, which accounts for about 55% of its revenue, also purchases higher-margin consumables like gloves, masks, tools and other items needed to keep projects running smoothly. “Depending on the mix, the margin impact could be neutral,” Bellinger said. Ellsberry’s purchasing behavior reflects this dynamic. He spent about $167,000 through Home Depot’s Pro program last year, much of it on bulk building materials. “It’s framing, drywall, shingles, backerboard, caulk, mud,” Ellsberry said. Additionally, he said he purchased trash bags, plumbing equipment, lighting fixtures and safety-related equipment. Home Depot is also collaborating with home improvement startup AI Kai. As part of an evolution of Home Depot’s Renowalk tool, the effort allows contractors to capture photos of a job site and quickly produce a real-time list of Home Depot items with their prices. The Kai platform is still in testing mode, Rowe said, but with about 40 to 50 active customers. Home Depot is continuing its pro program in an unfavorable macroeconomic context. The stock fell 11.5% last year, held back by high mortgage rates. To be fair, the stock rallied from late August through September, in anticipation of what became the Federal Reserve’s first interest rate cut of 2025. Unfortunately, that cut, along with two others in October and December, failed to significantly reduce long-term bond yields, which determine mortgage rates. This is a repeat of 2024, when multiple Fed rate cuts provided little relief. In 2026, however, the stars may finally align for Home Depot, thanks in part to President Donald Trump’s push for a Fed rate cut. Jim Cramer said Home Depot was the Investing Club’s best bet on lower rates. Trump is expected to appoint a more dovish Fed chair as Jerome Powell’s term as head of the central bank comes to an end in May. Maybe the president doesn’t want to wait. Powell, whom Trump appointed during his first term, is the subject of a federal criminal investigation related to the $2.5 billion renovation of the central bank’s headquarters. Powell said the investigation was a ploy to pressure him into lowering rates. Whatever the outcome, Trump will choose the next Fed chair, who will almost certainly take office with a mandate to cut rates. HD 1Y mountain Home Depot 1 year Home Depot shares have gained nearly 10.5% so far in 2026 to around $380. They received a big boost last Thursday when Trump ordered his “representatives” – Fannie Mae and Freddie Mac – to buy $200 billion in mortgage bonds in an effort to lower rates. A day later, the rate on a 30-year mortgage fell 22 basis points to 5.99%, matching its lowest level on February 2, 2023, according to Mortgage News Daily. On Wednesday, the president said he wanted to ban large institutional investors from buying more single-family homes, which he said would unlock housing supply and increase affordability. All of these tailwinds put Home Depot stock on a four-game winning streak. We purchased 25 additional Home Depot shares at $344 each on earnings day, November 18, as shares sold off due to third-quarter misses in adjusted earnings per share and same-store sales. Management, in addition to reducing margins, also reduced its full-year adjusted EPS outlook by 5% year-over-year, anticipating continued pressure in the fourth quarter. They previously forecast profits would decline by about 2%. While reiterating our 1 Equivalent Buy rating right after the third quarter results, we lowered our price target on Home Depot from $440 to $420 per share at the time. This PT is approximately 10.7% higher than Thursday’s close. (Jim Cramer’s Charitable Trust is long in HD. See here for a complete list of stocks.) As a subscriber to CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after a trade alert is sent before buying or selling a stock in his charity’s portfolio. If Jim talked about a stock on CNBC TV, he waits 72 hours after the trade alert is issued before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, AS WELL AS OUR DISCLAIMER. NO OBLIGATION OR FIDUCIARY OBLIGATION EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR PROFITS ARE GUARANTEED.
Add A Comment