Upgrade and Higher Stake Drive Lowe’s Stock Today

Today, Lowe’s Companies (NYSE:LOW) was trading 2.7% higher at 10:49 AM ET. The company has outperformed the broader equity market today. The S&P 500 Index was trading 1.2% higher at the same time. The upgrade from Loop Capital and the announcement that Pershing Square has increased its investment in the company led to an increase in Lowe’s stock price.

Loop Capital upgrades Lowe’s

Today, Laura Champine of Loop Capital upgraded Lowe’s from “hold” to “buy,” as reported by The Fly. Meanwhile, she lowered the target price from $115 to $105. The new target price represents a 12-month return potential of 18.3% from Monday’s closing price. As reported by The Fly, Champine stated that Lowe’s is currently trading at 15x her 2020 EPS estimates, which is very attractive. Meanwhile, she cut her revenue estimate for fiscal 2020 to $71.98 billion from $73.95 billion. Champine cut the EPS estimates from $6.52 to $5.71. She expects the company to have a difficult SSSG comparison in the first quarter of this fiscal year. However, she added that the company could deliver SSSG above her estimates. Lowe’s is one of the few retailers operating amid the lockdown.

Since the beginning of this month, many analysts have cut their target price for Lowe’s. Today, UBS lowered its target price from $140 to $130. Earlier, JPMorgan Chase, Wedbush, Credit Suisse, and Jefferies reduced their target prices. However, Instinet has hiked its target price from $100 to $120. Meanwhile, analysts’ consensus target price was $116.44, which represents a 12-month return potential of 31.2%. Wall Street favors a “buy” rating for the stock. Among the 30 analysts that follow Lowe’s, 80% recommend a “buy,” while the remaining 20% recommend a “hold.” None of the analysts recommend a “sell.”

Pershing Square raises its stake in Lowe’s

Today, Markets Insiders reported that Bill Ackman, who owns Pershing Square, wrote to shareholders. He thought about liquidating his portfolio due to havoc amid the coronavirus outbreak. However, he went for a large credit-hedging strategy, which turned his $27 million into $2.6 billion. Now, he has utilized the profits to increase Pershing Square’s stake in some of the companies. He increased Pershing Square’s stake in Lowe’s by 46%.

Stock performance

Lowe’s stock rose to a 52-week high of $126.73 on February 20. However, weak fourth-quarter sales and the global meltdown due to COVID-19 caused the stock to fall to a low of $60 on March 19. Meanwhile, the stock has delivered a significant recovery. The stock has risen by 48% from its March 19 lows to $88.77 as of Monday. Lowe’s has fallen by 25.9% YTD. So far, the company has underperformed Home Depot (NYSE:HD) and the S&P 500 Index. Home Depot has lost 12.4% of its stock value this year, while the S&P Index has fallen by 17.6%.