Why This Lowe's Analyst Is Turning Bullish

Although Lowe’s Companies Inc LOW could continue to face near-term challenges, key economic indicators suggest a stronger-than-expected economic recovery and investors “should continue to focus upon shares of cyclically driven enterprises,” according to Oppenheimer.

The Lowe’s Analyst: Oppenheimer analyst Brian Nagel upgraded the rating for Lowe's from Perform to Outperform, while keeping the price target unchanged at $235.

The Lowe’s Thesis: The company and its stock have been “largely overlooked as a high-quality, self-help, inexpensive cyclical play,” Nagel said in the upgrade note.

The stock currently trades at a historically discounted valuation versus Home Depot Inc HD and could benefit from “a continued flow of funds into more cyclically focused equities,” she added.

“We remain optimistic that ongoing internal initiatives at LOW should underpin a continued climb higher in profit rates for the company, particularly as N-T disruptions subside,” the analyst wrote.

She further stated, “As COVID-19 headwinds ease, sales and profit trends at LOW are apt to moderate, as spending normalizes, broadly. Our positive call on LOW is currently shorter-term and tactical in nature and hinged upon prospects for investor funds to continue to flow into shares of more economically sensitive enterprises and a compelling relative valuation.”

LOW Price Action: Shares of Lowe’s Companies had risen by 2.77% to $200.89 at the time of publication Thursday.

(Photo: Lowe's Companies Inc.)