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Source: HD Supply

How Are Lowe's and HDS Stocks Trending on the Merger News?

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Lowe’s and HD Supply's stock prices had a huge reaction after Bloomberg reported on Nov. 9 that Lowe’s is in talks to buy HD Supply. However, Lowe’s denied the news in a statement. How have both companies' stock prices trended in 2020? Is there an upside potential for them?

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Source: Lowe's

HD Supply news

On Nov. 9, Bloomberg reported that home improvement retailer Lowe’s is in preliminary talks to purchase HD Supply Holdings, which is a building products distributor. Bloomberg said that the companies are discussing a deal with advisers, although no final decision has been made. 

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Lowe’s stated that it isn't in talks to acquire HD Supply. Lowe’s said in a statement, “While it is the company's practice to not comment on rumors or speculation, we believe it is important to note that Lowe's is not in discussions with HD Supply and we have no plans to pursue a transaction with them.”

HD Supply is one of the largest industrial distributors in North America. The company provides products and value-added services to over 500,000 professional customers.  

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HD Supply's stock price today

HD Supply stock was trading higher after the Bloomberg news article. On Nov. 9, HDS stock closed higher by 0.64 percent. In after-hours trading, the stock rose by more than 16 percent at one point. Even after Lowe’s denied any discussion about the deal, HDS stock was trading higher by 3.2 percent in pre-market trading at 7:40 a.m. ET on Nov. 10. 

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Lowe’s stock falls

Lowe’s stock fell by 8.9 percent on Nov. 9. The stock price has gained 28 percent year-to-date due to people splurging on home improvement amid the COVID-19 pandemic. During the second quarter, Lowe’s comparable sales increased by 35.1 percent. Its online sales surged by 135 percent year-over-year. Consumer spending on home improvement is expected to remain strong, which will likely benefit Lowe’s.

HDS's stock forecast

Currently, 17 analysts cover HD Supply. Among the analysts, eight recommend a buy, while nine recommend a hold on the stock. The median target price for HDS stock is $45.38, which implies a potential upside of 4 percent. Recently, UBS initiated coverage on the stock with a neutral rating and a target price of $42. According to The Fly, “While he sees support for the industrial economy through 2021, stock picking must be selective, the analyst tells investors.”

HDS stock has risen by nearly 90 percent from the peak COVID-19 pandemic lows in March. While the industrial distribution space is expected to remain strong, most of the upside has already been priced into the stock. Investors should look for another catalyst to enter the stock.

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