At least six Wall Street analysts lowered their price targets for The Home Depot (HD 0.35%) Stock following the release of second quarter results on August 13. UBS The analyst decided to take a different view and increased his price target from $400 to $425, but maintained a buy rating on the stock.

An analyst becomes more optimistic

It is unusual for an analyst to raise a price target after management has announced lowers its full-year expectations for sales and earnings. Home Depot management now expects full-year comparable sales to decline 3% to 4%, compared to the previous forecast of a 1% decline. Full-year diluted earnings per share are now expected to decline 2% to 4%, compared to the previous forecast of a 1% increase.

However, it is no secret that relatively high interest rates have limited the real estate market and spending on housing-related items. Numerous companies, including Hot tub And Pool Corp.and spoke of worsening end-market conditions. Therefore, bulls believe that much of the bad news is already priced in and that Home Depot stock has nowhere to go but up, while interest rates have nowhere to go but down.

In fact, UBS analyst Michael Lasser believes Home Depot is well positioned for an eventual recovery, a goal the company is achieving in part by recently acquiring SRS, a distributor of roofing, landscaping and pool products, to boost sales in the professional market.

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The bull and bear debate

UBS’s new target represents 17 percent upside from current prices and reflects bullish sentiment that lower interest rates will boost the real estate cycle. Bears, on the other hand, believe the recovery may be slower than many expect.

The debate will inevitably continue, but bulls should take encouragement from the relatively low unemployment numbers that typically support the housing market. While there are near-term risks to Home Depot stock, the long-term picture looks more positive.

US existing home sales data from YCharts