In advance of the home improvement company Lowe’s (NYSE:LOW) upcoming earnings report, Citi downgraded the stock.
The company changed its position on Lowe’s (NYSE:LOW) from Buy to Neutral because it believes that macro concerns, including increased inflation and a deteriorating housing market, will limit DIY spending and negatively impact profits.
Citi also issued a warning over an increase in Lowe’s (NYSE:LOW) promotional activities for big-ticket, discretionary categories in the second half of the year and in 2023.
Analyst Steven Zaccone explained that given the subpar 1H results, Citi sees a risk of a 2Q miss on SSS & EPS vs. Street with a chance to lower FY22 expectations. Given the negative overhang of a slowing housing market, Citi also thinks the buy-side is preparing for a miss and a guide-down, but he added that the analysts think there is less chance for a relief rally on reduced guidance.
Citi Downgrades Lowe’s
Citi decreased its Lowe’s (NYSE:LOW) price estimate from $222 to $205.
In premarket trading, shares of Lowe’s decreased 1.44% to $198.53.
EPS revisions for the companies’ Q2 earnings have been downgraded by analysts 19 out of the last 23 times.
Still, the Stock Has Been Up Lately
Over the past few months, the company’s shares on the NYSE have experienced a respectable share price gain in the teens. Some analysts believe that any price-sensitive news has already been taken into account by the stock’s share price because so many analysts cover the large-cap stock.
So what if the stock is still a good deal?
What Is the Value of the Companies?
Good news for investors: Lowe’s Companies is currently trading at a discount. Some analysts’ estimations place the stock’s intrinsic value at $330.98, which is higher than the current market valuation of the business. This suggests a potential window of opportunity to buy cheap. However, because the price swings of Lowe’s Companies’ stock are quite pronounced in comparison to those of the rest of the market, this could suggest that the price could fall, offering another opportunity to buy in the future.
Featured Image: Megapixl @Andreistanescu
