LOW: Lock-In Housing And AI Tools Will Support Gradual Home Improvement Recovery

Narrative Update

The analyst price target for Lowe's Companies has been raised by about US$5 to reflect slightly higher modeled fair value, modest tweaks to revenue growth, profit margins and future P/E assumptions, as analysts point to valuation, pent up demand in home improvement and a healthier mix across do it yourself and pro customers as key supports for the update.

Analyst Commentary

Recent research on Lowe's highlights a mix of optimism around long term home improvement demand and caution around near term earnings visibility, with several firms adjusting price targets and ratings after the latest results and outlook updates.

Bullish Takeaways

Bullish analysts see Lowe's valuation as relatively attractive, especially after recent target changes, and argue that current pricing already reflects some of the macro and housing pressure that has been discussed.
There is a constructive view on the balance between do it yourself and pro customers, with upgrades pointing to improving trends across both segments as a support for future growth in core home improvement categories.
Some research highlights potential upside from housing related demand and pent up renovation activity, with homeowners seen as more likely to invest in existing properties rather than move and give up lower mortgage rates.
A few models have been reset following the Q3 earnings report, with updated assumptions around comps and margins, and bullish analysts still maintaining positive ratings even where price targets were trimmed.

Bearish Takeaways

More cautious analysts have reduced price targets after the Q3 update, citing implied Q4 guidance that was below prior expectations and signaling some uncertainty around near term earnings progression.
Research notes point to comparable sales deceleration during the quarter, linked to last year's hurricane comparisons, a pressured housing market, and consumer uncertainty, which could limit short term operating leverage.
While some see potential support from factors like tax refunds or seasonality, there is still an acknowledgment that a clear inflection in demand has not yet emerged, which can make growth and margin trajectories harder to forecast.
Neutral ratings paired with lower targets suggest that, for more cautious analysts, risk and reward look more balanced after recent moves, with execution on comps and profitability seen as key swing factors for future valuation outcomes.

What's in the News

Lowe's is working with Google on new AI based shopping tools, using Google's retailer focused AI agents to support AI assisted shopping and ordering experiences for customers (Wall Street Journal).
The company updated full year 2025 earnings guidance, now expecting total sales of US$86.0b, compared with prior guidance of US$84.5b to US$85.5b.
Lowe's completed the repurchase of 17,468,731 shares, about 3.07% of shares, for US$4,218.63m under its buyback announced on December 7, 2022.
Aqara's Smart Lock B50, a Wi Fi deadbolt with app based access control and smart home integrations, is now available at more than 500 Lowe's stores and on Lowes.com.
SenesTech's Evolve Rat birth control bait is now available on Lowes.com, expanding access to a non poison, reproduction targeting rodent control option for homeowners and commercial users.

Valuation Changes

Fair Value: risen slightly from about US$273.22 to about US$278.13 per share, reflecting a modest uplift in modeled valuation.
Discount Rate: effectively unchanged, moving fractionally from about 9.18% to about 9.18%, indicating a stable risk assumption in the model.
Revenue Growth: nudged higher from about 5.59% to about 5.60%, a very small adjustment to the long term top line outlook used in the valuation.
Net Profit Margin: increased slightly from about 8.18% to about 8.20%, suggesting a marginally higher profitability assumption over time.
Future P/E: moved modestly higher from about 24.71x to about 25.09x, implying a slightly richer multiple applied to future earnings in the updated analysis.

Expansion into the Pro contractor market and integration of new digital capabilities position Lowe's for sustained growth, operational efficiency, and greater customer wallet share.
Market consolidation and scale advantages are set to enhance supplier bargaining power and cost efficiencies, supporting long-term margin improvement.
Major acquisitions, debt-related risks, tepid sales growth, labor pressures, and digital competition together threaten Lowe's operational margins, revenue growth, and long-term earnings potential.

Catalysts

About Lowe's Companies

Operates as a home improvement retailer in the United States.What are the underlying business or industry changes driving this perspective?

The acquisition of Foundation Building Materials (FBM) sharply accelerates Lowe's access to the large Pro contractor market-especially in key underserved regions (California, Northeast, Midwest)-unlocking new revenue streams, greater ticket sizes, and a larger share of the $250 billion Pro market, which is expected to drive above-market sales growth and improved diversification of revenue over the coming years.
Ongoing pent-up demand from delayed home improvement projects, combined with record-high aging U.S. housing stock and an estimated 18 million new homes needed by 2033, points to a significant runway for future growth in renovation, repair, and new construction; this will positively affect revenue and support sustained top-line expansion as the housing cycle recovers.
Continued investment in digital and omnichannel capabilities-including AI-powered tools for associates and new digital solutions brought through FBM's technology (e.g., MyFBM app, digital blueprint takeoff)-is expected to enhance operational efficiency, improve service levels for Pro and DIY customers, and drive incremental margin expansion through productivity gains.
Cross-selling opportunities arising from the integration of FBM and ADG (flooring, cabinets, countertops) enable Lowe's to offer comprehensive interior solutions to large builders, boosting wallet share per customer and supporting margin and earnings growth through higher attachment rates and bundled sales.
Market consolidation trends and Lowe's growing scale in both retail and distribution are poised to strengthen its bargaining power with suppliers, optimize procurement, and improve cost efficiencies, helping to defend and potentially expand both gross and operating margins over the long term.

Lowe's Companies Earnings and Revenue Growth

Lowe's Companies Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Lowe's Companies's revenue will grow by 4.0% annually over the next 3 years.
Analysts assume that profit margins will increase from 8.2% today to 8.9% in 3 years time.
Analysts expect earnings to reach $8.4 billion (and earnings per share of $15.27) by about September 2028, up from $6.8 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $7.2 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 23.5x on those 2028 earnings, up from 22.1x today. This future PE is greater than the current PE for the US Specialty Retail industry at 18.7x.
Analysts expect the number of shares outstanding to decline by 1.14% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.8%, as per the Simply Wall St company report.

Lowe's Companies Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The success of Lowe's major acquisitions (FBM and ADG) hinges on complex integration and execution; failure to effectively merge operations, technology, and cultures could lead to higher costs, operational disruptions, and lower-than-anticipated synergy realization, negatively affecting net margins and long-term earnings.
The significant debt financing required for the $8.8 billion FBM acquisition will suspend share repurchases until 2027 and temporarily elevate leverage, increasing the company's exposure to interest rate changes and financial risk, which may weigh on earnings growth and shareholder returns.
Flat to low single-digit comparable sales guidance and management's cautious commentary on a "flat home improvement market" signal that housing turnover and discretionary big-project demand remain suppressed by high mortgage rates and affordability concerns-potentially limiting revenue growth despite favorable secular trends.
Persistent labor shortages and rising labor costs among both Pro customers and Lowe's workforce threaten to pressure operating margins and erode customer service advantages, possibly leading to margin compression and reduced earnings power long term.
Ongoing market risk from digital disruption, large supplier bargaining power, and direct-to-consumer competition (including e-commerce channel rivalry and major brands bypassing retailers) may threaten Lowe's in-store and online sales growth, undermining both revenue expansion and margin improvement initiatives.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $281.839 for Lowe's Companies based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $325.0, and the most bearish reporting a price target of just $221.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $94.0 billion, earnings will come to $8.4 billion, and it would be trading on a PE ratio of 23.5x, assuming you use a discount rate of 8.8%.
Given the current share price of $269.03, the analyst price target of $281.84 is 4.5% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Digital Tools And Acquisitions Will Capture Underserved Pro Markets