Benzinga | May 13, 2021 12:26PM EDT

Why This Lowe's Analyst Is Turning Bullish

Although Lowe's Companies Inc (NYSE:LOW) could continue to face near-term challenges, key economic indicators suggest a stronger-than-expected economic recovery and investors "should continue to focus upon shares of cyclically driven enterprises," according to Oppenheimer.

The Lowe's Analyst: Oppenheimer analyst Brian Nagel upgraded the rating for Lowe's from Perform to Outperform, while keeping the price target unchanged at $235.

The Lowe's Thesis: The company and its stock have been "largely overlooked as a high-quality, self-help, inexpensive cyclical play," Nagel said in the upgrade note.

The stock currently trades at a historically discounted valuation versus Home Depot Inc (NYSE:HD) and could benefit from "a continued flow of funds into more cyclically focused equities," she added.

"We remain optimistic that ongoing internal initiatives at LOW should underpin a continued climb higher in profit rates for the company, particularly as N-T disruptions subside," the analyst wrote.

She further stated, "As COVID-19 headwinds ease, sales and profit trends at LOW are apt to moderate, as spending normalizes, broadly. Our positive call on LOW is currently shorter-term and tactical in nature and hinged upon prospects for investor funds to continue to flow into shares of more economically sensitive enterprises and a compelling relative valuation."

LOW Price Action: Shares of Lowe's Companies had risen by 2.77% to $200.89 at the time of publication Thursday.

(Photo: Lowe's Companies Inc.)