The housing market continues to struggle but home remodelingis on the rise, and that helps Home Depotand Lowe’s Cos., Cannacord Genuity retail analyst Laura Champine told CNBC.
In the fourth quarter, Home Depot had its best same-store sales since 2004, while Lowe’s in the same period reported its highest comparable-store sales since 2006, she said.
But while the shares of both companies are hitting multiyear highs, she has “neutral” ratings on both stocks. Why?
“We’re waiting for home prices to start trending up, because I think that could drive a multiyear cycle,” said Champine, who has a $27 price target on Lowe’s and a $45 target on Home Depot.
She prefers Home Depot over Lowe’s because it has improved its supply chain and merchanding. But her “absolute favorite” is Lumber Liquidators Holdings, which has a new CEO “who is doing really dramatic things to bring their cost structure down. If we get a multiyear uptrend in remodeling, they really will benefit from that.”
Champine has a “buy” rating and a $26 target on the stock.
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Disclosure information was unavailable for Champine and her company.