Home improvement retailers like Home Depot (HD +0.03%) and Lowe's (LOW 0.72%) have remained open as essential businesses during lockdowns brought on by the ongoing COVID-19 pandemic. Both companies reported strong first-quarter earnings results, and analyst Chuck Grom with Gordon Haskett just moved his firm's price target on Lowe's from $110 to $151 per share.
Grom believes the recent strength in the sector is not just a short-term boost from stay-at-home restrictions that have led people to catch up on home improvement projects. Though he says he is still a "tremendous fan" of Home Depot, Grom thinks there's more of a valuation gap with Lowe's, and has moved his rating on it from hold to buy. The firm's new price target implies a 15% gain from the current stock price.
Image source: Getty Images.
Lowe's reported an increase of 12.3% in its U.S. comparable store sales when it reported earnings last month, compared with a 7.5% increase at Home Depot. Since the end of 2017, Home Depot has been successfully executing its "One Home Depot" strategy which partly focused on improving digital sales. In its most recent earnings conference call, Home Depot said sales using its digital platform increased 80% versus the prior year.
Lowe's CEO Marvin Ellison joined the company in July 2018, and has also focused the company more on its online strategy. The company said its online sales increased 80% in the most recent quarter. Both companies have withdrawn 2020 financial guidance due to the uncertainty related to the pandemic, but Lowe's said it expects to provide more frequent periodic updates on its business through the current quarter.
