Home Depot and Lowe's Stocks Dip After Downgrade

Home Depot Inc. and Lowe’s Cos. stocks have experienced a decline in premarket trading after being downgraded by Oppenheimer. The two construction-material and hardware giants have been lowered from outperform to perform, and their target prices have been reduced.

According to Oppenheimer, the upcoming initial 2024 guidance from Home Depot and Lowe’s "could prove unfavorable catalysts for shares." Home Depot is set to release its fourth-quarter results on February 20, followed by Lowe’s on February 28.

In response to the downgrade, Home Depot's stock (HD) fell by 0.9%, while Lowe's (LOW) retreated by about 0.7%.

Brian Nagel, an analyst from Oppenheimer, has cut Home Depot's price target to $345 per share from $360, and reduced Lowe's target to $230 from $275. Nagel expressed caution in a research note, stating, "We assume a more cautious, near-term stance towards home improvement retail." He also expressed concern that market positioning towards Home Depot and Lowe's may have become too complacent, potentially failing to adequately account for any underlying weakness in the chains.

Despite the downgrade, Nagel remains bullish on the longer-term prospects for the sector, acknowledging that the "structural underpinnings of home improvement retail remain intact." However, analysts have suggested that upcoming initial 2024 guidance from both Home Depot and Lowe's could present unfavorable catalysts for shares.

Nagel advises investors who are looking to play prospects for strengthening trends in the sector and these companies to wait for better entry points in the coming weeks and months.

In the past year, Home Depot's stock has risen by 14.9%, and it is one of the 30 stocks that make up the Dow Jones Industrial Average (DJIA), which has seen a 13.5% increase in the same period. Conversely, Lowe's stock has fallen by 1.1% in the past year, while the S&P 500 (SPX) has experienced a substantial 21.8% increase.

Also read: Buy Home Depot’s Stock Because the Housing Market Is Bottoming, Analyst Says