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Why SunTrust Robinson Humphrey Upgraded Lowe’s

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SunTrust Robinson’s upgrade

On September 28, SunTrust Robinson Humphrey upgraded Lowe’s (LOW) from “hold” to “buy” and raised its price target from $110 to $138. The new price target represents a return potential of 20% from its stock price of $114.52. Barron’s reported that Keith Hughes of SunTrust Robinson said that Lowe’s stock could rise 50% if the company manages to reclaim half of the difference between its SG&A (selling, general, and administrative) expenses and Home Depot’s expenses. It seems Lowe’s problems are more internal rather than as a result of competition.

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Hughes believes that Marvin Ellison, Lowe’s CEO, knows where Lowe’s major problems lie and is tackling them head-on, which was evident from the recent closure of the company’s Orchard Supply stores. He further added that the company’s second-quarter results and his meeting with Ellison “point to a turnaround that is internally focused and should come at a consistent pace over next the two to three years.”

Other analysts’ recommendations

Of the 33 analysts that follow Lowe’s, 81.8% are favoring a “buy,” and 18.2% are favoring “hold” recommendations. None of the analysts are favoring “sell” recommendations. On average, analysts have set an average price target of $120.86, which represents a return potential of 5.3%.

Since the announcement of Lowe’s second-quarter earnings on August 22, UBS, Raymond James, Telsey Advisory Group, Stifel, Jefferies, Wedbush, and RBC have all raised their target prices. On September 28, Telsey Advisory Group had raised its price target from $123 to $126, and on September 27, RBC Capital Group had increased its price target from $118 to $123.

Peer comparisons

Of the 35 analysts that follow Home Depot (HD), 77.1% recommend a “buy,” while 22.9% recommend a “hold.” On average, analysts set a price target of $215.47, which represents a return potential of 4.0% from its stock price of $207.15.

Of the 26 analysts that follow Williams-Sonoma (WSM), 3.8% recommend a “buy,” 80.8% recommend a “hold,” and 15.4% recommend a “sell.” Analysts have an average price target of $62.05, which represents a fall of 5.6% from its stock price of $65.72.

Of the 22 analysts that follow Bed Bath & Beyond (BBBY), 4.5% recommend a “buy,” 59.1% recommend a “hold,” and 36.4% recommend a “sell.” Analysts have an average price target of $15.31 on the stock, which represents a return potential of 2.1% from its current price of $15.0.

Next, we will look at Lowe’s stock performance.

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