Lowe’s, Home Depot shares rise as Telsey upgrades on strong growth prospects

Investing.com -- Shares of Lowe’s Companies Inc. (NYSE:LOW) and Home Depot Inc. (NYSE:HD) rose in pre-market trading after analysts at Telsey Advisory Group upgraded both stocks. 

The upgrades signal a promising outlook for the two leading home improvement giants, which had faced recent headwinds due to macroeconomic challenges, including higher interest rates and a cooling housing market.

For Home Depot, Telsey raised its price target to $455 from $360 and upgraded its rating to ‘outperform’ from ‘market perform’. 

Similarly, Lowe’s saw its price target climb to $305 from $275, with its rating also moved to ‘outperform.’ 

As per Telsey analysts, the revisions were driven by a combination of favorable factors expected to boost consumer spending in the coming months. 

These include a recent 25-basis-point cut in the Federal Reserve’s interest rates, the second such cut this year, which is anticipated to encourage home improvement investments, traditionally sensitive to borrowing costs.

Another critical factor contributing to the optimism is the expected tailwinds from hurricane recovery efforts. 

Both companies stand to benefit from increased demand for materials and repair services following Hurricanes Helene and Milton, extending well into 2025. 

Additionally, analysts flagged that both companies are poised to capitalize on easier year-over-year sales comparisons as pandemic-driven spending patterns normalize.

Home Depot is forecast to leverage its Pro customer base more effectively, tapping into an estimated $250 billion market. 

Lowe's, on the other hand, continues to execute its Total (EPA:TTEF) Home Strategy, which includes enhancements in digital capabilities and product localization. This pivot could strengthen its foothold in a fragmented market of small-to-medium-sized contractors.

These upgrades come at a crucial time, as both stocks had shown signs of underperformance relative to the broader market earlier this year.