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Home Depot, Lowe’s Could See Lift, Analyst Says

A spate of positive news for housing this week could signal significant gains for Home Depot and Lowe’s, one analyst said Friday.

“I think we’re very early in the game right now for Home Depot and Lowe’s,” Oppenheimer analyst Brian Nagel said on “Fast Money.”

Several quarters of stabilization in the sector, as well as housing data, made Nagel bullish on the stocks, forecasting “prolonged recovery for both, and I think there’s gains for some time to come.”

The National Association of Home Builders released a sentiment survey this week, showing the highest level of optimism in four years among members, doubling since September.

Last week, NAHB CEO Jerry Howard cited an increase in the group’s trade show in Orlando, Fla., as a positive sign.

To the valuation issue for Home Depot, Nagel took a long-term view.

“If you look at the multiple for Home Depot today, which is about 17 times, that does look high,” he said. “But I think the key to understand, in my view, is that earnings for that company are still very depressed.”

Nagel said over the next five years, he saw “more than $5 of growing power” in Home Depot’s share price.

Steve Grasso of Stuart Frankel said he preferred one name over the other.

“I’d rather be a buyer of Home Depot,” he said. “You get a slightly better yield off it.”

Shares of Home Depot closed at $46.71, up 1.7 percent. Lowe’s closed at $27.61, up 1.35 percent.


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Trader disclosure: On Feb. 16, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Weiss is long RIMM; Weiss is long HPQ; Weiss is long QCOM; Weiss is long CHRS; Weiss is long VZ; Weiss is long BRCM; Weiss is long SNDK; Weiss is long MDRX; Weiss is short AAPL puts; Weiss is long AMZN puts; Weiss is short MT; Najarian is long AAPL call spreads; Najarian is long GS call spreads; Najarian is long RVBD call spreads; Najarian is long JNPR call spreads; Najarian is long FIO call spreads; Najarian is long NBR call spreads; Najarian is long LTD call spreads; Najarian is long M call spreads; Najarian is long TJX call spreads; Najarian is long HPQ call spreads; Najarian is long RIG call spreads; Grasso is long ASTM; Grasso is long S; Grasso is long XLU; Grasso is long AVAV; Grasso is long BA; Grasso is long D; Grasso is long DIO; Grasso is long LIT; Grasso is long MHY; Grasso is long NUAN; Grasso is long MO; Grasso is long PFE; Grasso is long PRST;

For Steve Grasso
Stuart Frankel & Co and it’s partners own CSCO

Stuart Frankel & Co and it’s partners own HPQ

Stuart Frankel & Co and it’s partners own MU

Stuart Frankel & Co and it’s partners own P

Stuart Frankel & Co and it’s partners own ZNGA

For Camilla Sutton
No disclosures

For Jeff Kilburg
Kilburg is long TLT

Kilburg is long SPXU

For Katie Stockton
No disclosures

For Brian Nagel
No disclosures

For Aaron Chew
(FSLR) I, Aaron Chew, attest that the views expressed in this research report accurately reflect my personal views about the subject security and issuer. Furthermore, no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report.

The research analyst(s) primarily responsible for the preparation of this research report have received compensation based upon various factors, including the firm’s total revenues, a portion of which is generated by investment banking activities.

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