JPMorgan Upgrades Lowe’s Companies to Overweight
JPMorgan’s Analysis of Lowe’s Companies Upgrade
JPMorgan analysts upgraded Lowe’s Companies to Overweight from Neutral and added the stock to its Focus List on Monday. They raised the target price to $265 from $210, highlighting the positive outlook for the home improvement sector.
Consumer Spending Trends in Home Improvement Sector
Analysts noted that goods’ share of wallet headwinds are moderating, with trends reverting back toward wage growth. They believe that historical consumption trends can be revived, leading to a potential surge in the sector’s performance in the near future. The current share of consumer spending in the home improvement sector is estimated to be nearly 5% below its pre-COVID levels, with particular emphasis on the challenges faced by the do-it-yourself (DIY) segment.
Comparison of Lowe’s and Home Depot Sales Categories
Analysts pointed out that Lowe’s has a significant advantage in the appliances category, which accounts for 13.9% of its revenue, compared to the 9.2% for Home Depot. They indicated that the deflation process in the appliances category has progressed further for Lowe’s, positioning the company favorably in this segment.
Expected Decline in Mortgage Rates and Housing Market Outlook
The housing market is expected to witness a 150 basis points decrease in rates within the next year, potentially leading to lower mortgage rates. The historical impact of mortgage rates hitting 5.5% suggests a potential growth of over 20% in the sales of single-family existing homes (EHS), providing a positive outlook for the housing market.
Expectations for Lowe’s Guidance for 2024
Analysts anticipate Lowe’s to guide somewhere in the $12.00-$12.50 range for 2024 to clear the decks, highlighting the company’s strategic financial planning and its impact on future developments.
