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Lowe's could see 'big turnaround' and 80% upside for stock, analyst says

Key Points
  • "Under the guidance of the new CEO, Lowe's is getting its act together," says Oppenheimer's Brian Nagel.
  • "If we're right here and this continues, this stock has a long way to run," he argues.
  • Nagel credits retail veteran Marvin Ellison, who become Lowe's CEO about 13 months ago, for strong quarterly earnings.
Home improvement store Lowe's beats on top and bottom lines

Better-than-expected quarterly earnings and revenue at Lowe's on Wednesday could be a turning point for the home improvement company that has lived for years in the shadow of Home Depot, according to Oppenheimer retail analyst Brian Nagel.

As the stock soared before Wednesday's opening bell, Nagel said he sees "big turnaround potential" for a company and a stock, which have "lagged for years." Shares of Lowe's were up 10% early Wednesday afternoon, trading about $107.

In a "dream the dream scenario," Nagel calculated that Lowe's stock could see $180 per share. That would represent an almost 84% increase from where it closed Tuesday at about $98 per share.

"If I model this out, there's more than $10 in earnings-per-share at Lowe's. You put an 18 [times] multiple on that," Nagel said on CNBC's "Squawk Box." However, he said his official price target for Lowe's is $135 per share.

Nagel credited retail veteran Marvin Ellison, who left J.C. Penney 13 months ago to become Lowe's CEO, for the encouraging numbers. Ellison also spent decades in executive roles at Home Depot and Target.

"It seems under the guidance of the new CEO, Lowe's is getting its act together — and frankly, if we're right here and this continues, this stock has a long way to run," Nagel said.

However, he said investors don't have to choose between Lowe's and Home Depot.

"Home Depot [is] a very quality company; under-valued stock even with yesterday's bounce. Lowe's [is a] turnaround opportunity," he said. "Two different types of investment vehicles, but I don't think you'd be hurt owning them both here."

Home Depot shares surged 4.4% on Tuesday after the company beat estimates with second-quarter earnings.

However, revenue did fall short of expectations, and the company lowered its sales outlook for the year on concerns about the U.S.-China trade war slowing consumer spending.

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Lowe's stock soars after the retailer beats second-quarter earnings and revenue estimates

Key Points
  • Lowe's second-quarter earnings and revenue beat Wall Street expectations.
  • It reports U.S. same-store sales were up 3.2%, slightly higher than competitor Home Depot's.
  • Shares gained more than 10% on Wednesday.