Why Analysts Recommend a ‘Buy’ for Lowe’s

As of May 15, 2017, Lowe’s (LOW) is trading at $85.59. The stock price might have factored in various estimates that we discussed earlier in the series. In this part, we’ll look at analysts’ target price and their recommendations.

Better-than-expected 1Q17 earnings and favorable macroeconomic factors might have compelled analysts to raise their price target for the next 12 months. As of May 15, 2017, analysts expect Lowe’s stock price to reach $89.24 in the next 12 months—a return potential of 4.3%. Before the announcement of its 4Q16 earnings, analysts expected a price target of $80.6.

Analysts’ 12-month target prices for Lowe’s peers are as follows:

• Home Depot (HD) – $161.32 with a potential return of 2.5%
• Bed Bath & Beyond (BBBY) – $39.05 with a potential return of 8.6%
• Williams-Sonoma (WSM) – $51.79 with a potential return of 1.2%

Of the 31 analysts that follow Lowe’s, 58.1% recommend a “buy,” 38.7% recommend a “hold,” and 3.2% recommend a “sell.” Lowe’s stock moves in tandem with analysts’ recommendations. When analysts raise their target price, the stock price increases and vice versa. The current price is lower than the target price—it doesn’t mean an automatic “buy.” You should carefully analyze the various factors that we discussed in this series before making any investment decisions.