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Analysts Favor a ‘Buy’ Rating for Lowe’s

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Analysts’ recommendations

After Lowe’s Companies (LOW) posted its fourth-quarter earnings results on February 27, Jefferies, RBC, Morgan Stanley, Stifel, Wedbush, and UBS raised their price targets on its stock. Jefferies hiked its price target from $119 to $126, Stifel raised its price target from $96 to $108, and Wedbush increased its price target from $95 to $110. On March 20, Evercore ISI initiated coverage on Lowe’s with an “outperform” rating and a price target of $120.

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Of the 32 analysts that follow Lowe’s, 68.8% have given it “buy” recommendations, while 31.3% have given it “hold” recommendations. No analysts have given it “sell” recommendations. Analysts have given the stock a 12-month average price target of $116.93, which represents a potential upside of 7.9% from its price of $108.35 on March 28.

Peer comparison

Of the 34 analysts that cover Home Depot (HD), 67.6% have given it “buys,” and 32.4% have given it “holds.” Analysts have given the stock a 12-month average price target of $203.76, which represents a potential return of 7.2% from its March 28 closing price of $190.06.

Valuation multiple

The increase in Lowe’s stock price since the beginning of this year has also raised its valuation multiple. On March 28, the company was trading at a forward PE multiple of 17.5x compared to 15.5x at the beginning of 2019. Lowe’s peer Home Depot was trading at a forward PE multiple of 18.6x on March 28. Strong same-store sales growth and higher margins have allowed Home Depot to trade at a higher valuation multiple than Lowe’s.

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