Citigroup says Home Depot and Lowe's Stock have more room to maneuver

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Both
Lowe's

and
Home Depot

rallied to the wider market this year. Citigroup argues that equities can continue to rise, thanks to the demand for home renovation and the defensive advantage of businesses.

The history of return. Although the retail trade has been hard hit this year – and may be even more painful – not all department stores are created equal. Home Depot (ticker: HD) and Lowe's (LOW) have avoided most of the concerns about the trade war and consumer habits that have affected other sectors of the industry, helped recently by strong financial results released late August .

Home Depot has risen 35.6% since the beginning of the year, while Lowe's, languishing this summer, has regained momentum and increased by 23.2% in 2019, a period
S & P 500
gained 20%.

What's up. Friday, Citi analyst Gregory Badishkanian Let's assume that Home Depot and Lowe's are covered, keeping stock quotes and raising their price targets from $ 246 to $ 137, and from $ 122 to $ 137, respectively.

He writes that The Home Depot should benefit from "macroeconomic fundamentals and still-strong underlying housing drivers," while the company could also generate sales and margin improvement, "a rarity in the retail business."

With respect to Lowe's, Mr. Badishkanian is impressed by the company's changes to merchandise, store operations, supply chains and professional services, which he believes could generate a number of dollars. comparable business and earnings growth. "Lowe's could also possibly re-evaluate upwards by reducing the performance gap compared to Home Depot," he notes.

Look to the front. Badishkanian writes that there is still "extra wandering in this economic expansion", which fuels his optimism about the shares. Consumer confidence is high, while unemployment remains low and rising wages give homeowners increased purchasing power as the debt seems manageable.

"In the area of ​​home renovation, sales growth in the medium and single digit should be driven by remodeling [spending] As the age of the US housing stock continues to increase, house prices are rising, housing turnover is continuing and interest rates are low, "he said.

Of course, this could change if the economy deteriorated, given the cyclical nature of housing. Yet, for the moment, Badishkanian is convinced that this is not on the horizon and considers that Lowe's and Home Depot are more resistant to the recession than many other retailers.

Home Depot shares are down 0.3% to $ 233.02 in recent transactions, while Lowe's shares are stable at $ 113.82.

Write to Teresa Rivas at [email protected]