Should You Buy Lowe’s Stock At $203?

LOW: Lowe's logo

Lowe’s stock (NYSE: LOW), a home improvement retailer, experienced almost a 2% gain over the last week (five trading days) to levels of around $203 currently. But will the company’s stock see higher levels over the coming weeks, or is a decline in the stock imminent? According to the Trefis Machine Learning Engine, which identifies trends in a company’s stock price, returns for the LOW stock average around 2.6% in the next one month (twenty-one trading days) period after experiencing a 1.5% rise in a week.

But how would these numbers change if you are interested in holding Lowe’s for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test Lowe’s stock chances of a rise after a fall. You can test the chance of recovery over different time intervals of a quarter, month, or even just one day!

MACHINE LEARNING ENGINE – try it yourself:

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IF LOW stock moved by -5% over five trading days, THEN over the next twenty-one trading days, LOW stock moves an average of 3.0%, which implies an excess return of 1.3% compared to the S&P500.

More importantly, there is a 60% probability of a positive return over the next twenty-one trading days and a 51% probability of a positive excess return after a -5% change over five trading days.

Some Fun Scenarios, FAQs & Making Sense of Lowe’s Stock Movements:

Question 1: Is the average return for Lowe’s stock higher after a drop?

Answer: Consider two situations,

Case 1: Lowe’s stock drops by -5% or more in a week

Case 2: Lowe’s stock rises by 5% or more in a week

Is the average return for Lowe’s stock higher over the subsequent month after Case 1 or Case 2?

LOW stock fares better after Case 2, with an average return of 3.0% over the next month (twenty-one trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 4.1% for Case 2.

In comparison, the S&P 500 has an average return of 3.1% over the next twenty-one trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.

Try the Trefis machine learning engine above to see for yourself how Lowe’s stock is likely to behave after any specific gain or loss over a period.

Question 2: Does patience pay?

Answer: If you buy and hold Lowe’s stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!

For LOW stock, the returns over the next N days after a -5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:

You can try the engine to see what this table looks like for Lowe’s after a larger loss over the last week, month, or quarter.

Question 3: What about the average return after a rise if you wait for a while?

Answer: The average return after a rise is understandably lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks – although LOW stock appears to be an exception to this general observation.

LOW returns over the next N days after a 5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:

It’s pretty powerful to test the trend for yourself for Lowe’s by changing the inputs in the charts above.

While Lowe’s stock may have moved, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how the stock valuation for Lowe’s vs. D.R. Horton shows a disconnect with their relative operational growth. You can find many such discontinuous pairs here.
See all Trefis Price Estimates and Download Trefis Data here

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