Lowe's to rally 22%, Bank of America says

Getty Images

Investors should buy Lowe's shares as the retailer profits from the ongoing strong housing market, according to Bank of America Merrill Lynch, which reiterated its buy rating and added the company to its US1 top ideas list.

The home improvement retailer reported disappointing fiscal second-quarter earnings last Wednesday.

"We are adding Lowe's to our US1 list of top ideas across the U.S. market, taking advantage of share price weakness following 2Q earnings that disappointed on comps," analyst Denise Chai wrote in a note to clients Wednesday.

"We remain positive on sustained big-ticket demand for home improvement and believe LOW will continue to benefit from supportive macro trends including rising home prices, housing turnover and new home formation."