Key Takeaways:
- Integration Opportunity: Recent FBM and ADG acquisitions expand Pro reach and interior capabilities.
- Price Projection: The stock could reach $289 by January 2028 based on strategic initiatives.
- Potential Gains: This implies a 4.6% total return from the current $277 price.
- Annual Return: Investors could see roughly 2.2% annual growth over the next 2 years.
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Lowe’s (LOW) is navigating a tough home improvement market, but strategic investments signal confidence in long-term recovery. With comparable sales expected to be roughly flat for 2025, management is investing heavily in capabilities that will drive growth when housing markets stabilize.
The $8.8 billion Foundation Building Materials acquisition and Artisan Design Group purchase create a comprehensive interior platform.
FBM’s 370 locations strengthen fulfillment in high-density urban markets where Lowe’s has less physical presence. Combined with AI tools and 30 million MyLowe’s Rewards members (who shop twice as often and spend 50% more than non-members), multiple growth engines are taking shape.
Q3 results showed resilience, with the adjusted operating margin at 12.4% was, up 10 basis points, and adjusted EPS of $3.06, a 6% increase.
Despite lapping hurricane-related demand worth 100 basis points, the company delivered positive comps in 10 of 14 categories and double-digit home services growth.
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What the Model Says for Lowe’s Stock
We analyzed Lowe’s transformation into a comprehensive home-solutions platform serving both DIY and Pro customers.
- The Total Home Strategy focuses on: Pro business growth, online acceleration, loyalty programs, home services expansion, and space productivity.
- With a massive opportunity in suburban penetration and U.S. homeowners holding $33 trillion in home equity, there is significant runway.
Using 4.8% annual revenue growth and 12.2% operating margins, our model projects $289 within 2 years at an 18.2x P/E multiple.
This represents compression from the current 21.7x P/E. Acquisition dilution (50 basis points) and near-term housing uncertainty justify some multiple contraction.
However, the valuation reflects confidence in management’s execution and the potential for market recovery.
Our Valuation Assumptions
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Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for LOW stock:
1. Revenue Growth: 4.8%
Lowe’s growth operates across complementary channels:
Pro Momentum: Small-to-medium Pro business delivers consistent quarterly growth. MyLowe’s Pro Rewards, Pro Extended Aisle (expanded selection and delivery), and 5% daily credit card discounts are resonating.
Home Services: Double-digit comps driven by tech-enabled solutions streamlining customer journeys from quote to installation. Windows, doors, HVAC, and water heaters are gaining traction as the U.S. housing stock ages, and homeowners are tapping equity for replacements rather than moving and giving up low mortgage rates.
FBM Integration: Foundation Building Materials brings $1.3 billion in Q4 sales, expanding into commercial projects including data centers and medical facilities. The 50/50 commercial-residential split creates countercyclical stability—when housing slows, commercial outperforms. Artisan Design Group adds interior solutions from flooring to cabinets.
Digital Strength: Online sales up 11.4% in Q3. AI assistant Mylow doubles conversion rates. The marketplace launch expands assortment without inventory risk.
2. Operating margins: 12.2%
Balancing expansion with investments:
Q3 operating margin hit 12.4%, up 10 basis points. The company delivers $1 billion in productivity improvements.
FBM and ADG will pressure margins by 50 basis points in 2026, but management sees EBITDA synergies ahead.
Insurance savings fund volume-driving fare reductions. AI tools deliver double-digit productivity gains and lift customer satisfaction by 200 basis points.
3. Exit P/E Multiple: 18.2x
Current 21.7x compresses to 18.2x in our forecast.
The stock averaged 19.1x over the past year and 18.2x over the past three years.
Compression reflects housing headwinds, integration work, and the buyback pause during deleveraging, bringing the leverage ratio to 2.75x by mid-2027. Still, 18.2x recognizes market leadership, 95% employee engagement, elite AI adoption, and the comprehensive Total Home Strategy.
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What Happens If Things Go Better or Worse?
Home improvement retailers face housing cyclicality and consumer volatility. Here’s how Lowe’s might perform through January 2028:
- Low Case: If growth slows to 3.7% with 7.8% margins, the stock offers 0.2% annual return, reaching $279.
- Mid Case: With 4.2% growth and 8.2% margins, expect 5.1% annual return to $338.
- High Case: If initiatives drive 4.6% growth with 8.5% margins, returns hit 9.4% annually to $397.
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The range reflects housing recovery scenarios.
Downside risks: prolonged elevated rates, slower commercial construction, or tougher integration. Upside catalysts: HELOC rates (down from 10-12% to 8-10%) unlock $11-13 trillion in tappable equity, faster AI productivity gains, and FBM/ADG cross-selling exceeding expectations.
How Much Upside Does Lowe’s Stock Have From Here?
With TIKR’s new Valuation Model tool, you can estimate a stock’s potential share price in under a minute.
All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E Multiple
If you’re not sure what to enter, TIKR automatically fills in each input using analysts’ consensus estimates, giving you a quick, reliable starting point.
From there, TIKR calculates the potential share price and total returns under Bull, Base, and Bear scenarios so you can quickly see whether a stock looks undervalued or overvalued.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
