Key Takeaways:
A Barron's analysis highlights an opportune moment to buy Lowe's Companies Inc. (LOW), with a Telsey Advisory Group analyst forecasting 28 percent upside for the home improvement retailer.
"Lowe’s is the more compelling opportunity," Telsey Advisory Group’s Joe Feldman said, setting a $295 price target based on a 23 times price-to-earnings multiple.
The bullish case is built on the stock's valuation, which at 18 times forward earnings, is below its competitor Home Depot's 21 times multiple. This follows a 20 percent decline in Lowe's shares to $231 from a February high of $287, a drop influenced by rising long-term interest rates.
The stock's decline presents a buying opportunity as industry data shows improving trends. Evercore analyst Greg Melich's home improvement sales tracker indicated 3.8 percent year-over-year growth for the industry in the three months ending in March.
Lowe's is focusing on expanding its "pro" business, which targets professional contractors and carries higher operating profit margins than its do-it-yourself (DIY) segment. In the fourth quarter, the company reported that sales to contractors drove total same-store-sales growth. While pros accounted for 30 percent of Lowe's $86 billion in 2025 sales, the total U.S. home improvement and repair spending market hit $521 billion last year, suggesting significant room for growth.
Supporting the optimistic outlook, a recent UBS survey of 100 contractors showed an increasing number of projects over the past three months. According to UBS analyst Michael Lesser, 27 percent of respondents in April, up from 16 percent in March, reported a low-to-mid single-digit percentage increase in projects. Analysts are forecasting 0.5 percent same-store-sales growth for Lowe's in the first quarter.
The analysis suggests that as Lowe's continues to capture a larger share of the professional contractor market, its profit margins could expand, driving double-digit percentage growth in earnings per share. Investors will be watching the company's first-quarter earnings report on May 20 for confirmation of these trends.
This article is for informational purposes only and does not constitute investment advice.
