Telsey Affirms Lowe's Amid Housing Weakness, Stock Holds $240
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Fazen Markets Editorial Desk
Collective editorial team · methodology
loweshome-improvement-retail
Fazen Markets Editorial Desk
Collective editorial team · methodology
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Telsey Advisory Group reaffirmed its Outperform rating on Lowe's Companies, Inc. (LOW) with a $240 price target on May 24, 2026. The firm's analysis acknowledges persistent softness in the broader housing market but highlights the home improvement retailer's effective execution and strategic initiatives as key supports for its current valuation. This vote of confidence comes as the stock trades near $228, reflecting a nuanced view of company-specific strength against a challenging macroeconomic backdrop.
The US housing market has faced significant pressure throughout early 2026. Existing home sales declined for three consecutive months, with April's data showing a 4.1% month-over-month drop to a seasonally adjusted annual rate of 4.10 million units. This weakness is primarily attributed to elevated mortgage rates, with the average 30-year fixed rate hovering near 6.8%, dampening affordability and discouraging existing homeowners from listing their properties.
The last comparable period of sustained housing pressure occurred in the second half of 2022, when the Federal Reserve's aggressive tightening cycle began. During that phase, Lowe's stock declined approximately 30% from its peak, underperforming the S&P 500 by nearly 15 percentage points over six months. The current analyst reaffirmation signals a belief that Lowe's has adapted its operations to better withstand such cyclical downturns compared to previous cycles.
Lowe's reported first-quarter earnings on May 21 that demonstrated resilience. Comparable sales decreased 2.5%, a milder contraction than the broader housing market might suggest. This performance notably outperformed some housing-sensitive peers within the building products sector, which saw revenue declines exceeding 5%.
The company maintained a strong gross margin of 33.4%, consistent with the prior-year period, underscoring effective cost management. Lowe's also returned significant capital to shareholders, executing $2.1 billion in share repurchases and paying $633 million in dividends during the quarter. The stock's current price of $228 implies a forward price-to-earnings ratio of 17.5, a premium to its five-year average of 16.2, indicating embedded expectations for continued execution.
| Metric | Q1 2026 | Q1 2025 | Change |
|---|---|---|---|
| Comp Sales | -2.5% | -4.0% | +150 bps |
| Gross Margin | 33.4% | 33.4% | 0 bps |
Telsey's sustained bullishness on Lowe's suggests a view that the company is gaining market share through its Pro customer focus and digital initiatives, partially insulating it from macro headwinds. This is a negative read-through for pure-play housing ETFs like the iShares U.S. Home Construction ETF (ITB), which remains more directly exposed to new home construction rates.
A key counter-argument is that prolonged housing weakness will eventually pressure even the most resilient retailers. If mortgage rates remain elevated through 2026, a broader pullback in home improvement spending is probable. Institutional flow data indicates that while some hedge funds are shorting homebuilders like D.R. Horton (DHI), long positions in Lowe's and Home Depot (HD) are being maintained as a relative value trade against the sector.
The next major catalyst for Lowe's stock will be its second-quarter earnings release, scheduled for August 19, 2026. Investors will scrutinize comp sales guidance for any revision and monitor management commentary on Pro customer demand trends. The July 31 FOMC meeting will also be critical, as any signal of impending rate cuts could catalyze a sector-wide rally by improving housing affordability.
Technical levels to watch include support at the 200-day moving average near $220 and resistance around the $245 level, which has contained rallies throughout the first half of the year. A break below $215 would likely invalidate the current positive analyst thesis and signal a reassessment of fundamental headwinds.
The Outperform rating and $240 price target indicate Telsey analysts believe Lowe's stock will outperform the broader market average over the next 12 months. This target represents a potential 5.3% upside from the current price near $228. The affirmation suggests confidence in the company's strategy even if housing data remains soft.
Lowe's has recently closed the performance gap with its larger rival, Home Depot. While both face similar macro conditions, Lowe's is growing its Pro business at a faster rate, which provides more stable revenue streams compared to the more DIY-focused and seasonal business. This shift is a central part of the bullish investment thesis for Lowe's.
The primary driver of housing market weakness is elevated mortgage inflation-forecast-revision-june-rate-decision-2026" title="ECB's Lagarde Signals Upward Inflation Revision Ahead of June Meeting">interest rates, which have remained near 7% due to persistent inflation and a cautious Federal Reserve. High rates lock in existing homeowners with lower mortgages and price out new buyers, reducing transaction volumes that often drive home improvement projects at both Lowe's and Home Depot.
Lowe's is executing its strategy effectively to manage a difficult housing environment.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.
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