01:44 PM EDT, 06/17/2024 (MT Newswires) -- RH (RH) shares "requires extra patience" as macro hurdles counter prospects for new products and European expansion, Morgan Stanley said Monday in a note.

"We have been concerned bottom of cycle earnings have not yet been reached," Morgan Stanley said. "And the longer it takes for the macro/business to turn, the lower the multiple could potentially drift to price in this higher risk."

Morgan Stanely cut its 2024 earnings estimate to $8.11 a share from $8.70 and maintained the 2025 EPS forecast at $11.80, trailing the Wall Street consensus at $14.80.

The investment firm cut the price target on RH to $300 from $320 and kept the equalweight rating.

Guidance suggests a 12% to 14% growth in demand for 2024, supported by sourcebook deliveries. Launches such as the RH Outdoor sourcebook in Q1 with 14 new collections signal strong trends, the report said.

The company is also expanding gallery locations with several openings planned, and Chief Executive Officer Gary Friedman suggested a potential 20% revenue base growth from these efforts, Morgan Stanley said.

"Product margins are stabilizing, notwithstanding macro changes," the report said.

RH shares rose 1.5% in recent trading Monday.

Price: 233.10, Change: +3.37, Percent Change: +1.47