Can Lowe’s Stock Cross The $100-Mark Post COVID-19 Crisis?

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Lowe's

Comparing the trend in Lowe‘s (NYSE: LOW) stock over recent months with its trajectory during and after the Great Recession of 2008, we believe that the stock can potentially gain 20% once fears surrounding the coronavirus outbreak subside, potentially underperforming the broader S&P index. Our conclusion is based on our detailed comparison of Lowe’s performance against the S&P 500 in our interactive dashboard analysis, 2007-08 vs. 2020 Crisis Comparison: How Did Lowe’s Stock Fare Compare With S&P 500?

The World Health Organization (WHO) declared a global health emergency at the end of January in light of the coronavirus spread. Between January 31st and March 25, Lowe’s stock has lost 28% of its value (vs. about 26% decline in the S&P 500). A bulk of the decline came after March 6th, when an increasing number of Coronavirus cases outside China fueled concerns of a global economic slowdown. Matters were only made worse by fears of a price war in the oil industry triggered by an increase in oil production by Saudi Arabia.

Lowe’s Stock Has Fallen Considerably Because The Situation On The Ground Has Changed

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Consumers under lockdown-style conditions could likely forego home-improvement projects and focus on buying necessities such as food and medicine. In fact, home improvement and housing go hand in hand with the overall economic conditions which seem to be struggling due to the Covid-19 pandemic.

We believe Lowe’s Q1 and Q2 results will confirm this reality with a drop in its revenues. If signs of coronavirus containment aren’t clear by the May Q1 earnings timeframe, it’s likely Lowe’s stock, along with the broader market, is going to see a continued drop when results confirm palpable reality.

Lowe’s Stock Witnessed Something Similar During The 2008 Downturn

We see LOW stock declined from levels of around $23 in October 2007 (the pre-crisis peak) to roughly $13 in March 2009 (as the markets bottomed out) – implying that the stock lost as much as 44% of its value from its approximate pre-crisis peak. This marked a lower drop than the broader S&P, which fell by about 51%.

However, LOW stock partially recovered post the 2008 crisis, to levels of about $19 in early 2010, rising by 50% between March 2009 and January 2010. In comparison, the S&P bounced back by about 48% over the same period.

Will Lowe’s Stock Recover Similarly From The Current Crisis?

Keeping in mind the fact that LOW stock has fallen by 28% this time around compared to the 44% decline during the 2008 recession, we believe it can potentially recover partially by 20% to levels of $100 once economic conditions begin to show signs of improving. This marks a partial recovery back to the $120 level LOW stock was at before the coronavirus outbreak gained global momentum. 

That said, the actual recovery and its timing hinge on the broader containment of the coronavirus spread. Our dashboard forecasting US COVID-19 cases with cross-country comparisons analyzes expected recovery time-frames and possible spread of the virus.

Further, our dashboard -28% Coronavirus crash vs 4 Historic crashes builds a more complete macro picture and complements our analyses of Coronavirus impact on a diverse set of Lowe’s peers – competitor Home Depot. The complete set of coronavirus impact and timing analyses is available here.

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