Why Jefferies' Bullish Call on Lowe's Signals a DIY Recovery Ahead

Henry RiversMonday, Apr 21, 2025 7:03 am ET
30min read

The home improvement sector has been a mixed bag in recent years, buffeted by rising interest rates, inflation, and shifting consumer priorities. Yet, Jefferies’ recent $316 price target for Lowe's (LOW) suggests the retailer is positioning itself to capitalize on a DIY recovery down the road. This isn’t just optimism—it’s a calculated bet on Lowe's strategic moves to dominate both the professional contractor and do-it-yourself (DIY) markets.

Jefferies’ Bullish Case: More Than a Stock Pick

Jefferies’ January 2025 price target of $316—up from a previous $309—was grounded in Lowe's aggressive initiatives to rebuild its market share. Analysts highlighted the company’s Total Home Strategy, which integrates AI-driven tools, loyalty program expansions, and rural store growth. The firm’s confidence is reflected in its "buy" rating, even after revising the target downward to $274 in March 2025 due to near-term macroeconomic headwinds. The key takeaway? Jefferies believes Lowe's has the tools to outperform once the DIY recovery takes hold.

Lowe's Playbook: A Multi-Front Attack

Lowe's isn’t waiting for the economy to turn around—it’s building a platform to thrive in any environment. Here’s how:

  1. AI and Omnichannel Dominance
    Lowe's is rolling out an AI framework to improve customer experience and inventory management. This includes:
  2. A product marketplace (launched in 2025), offering a wider range of items without inventory costs.
  3. Personalized search and recommendations via its app, which now uses AI to simplify complex DIY decisions (e.g., flooring choices).
  4. Enhanced in-store associate tools to speed up transactions and reduce friction.

  1. Unified Loyalty Ecosystem
    The relaunch of its Pro loyalty program as MyLowe's Pro Rewards in early 2025 unites Pro and DIY customers under a single rewards system. This creates a flywheel effect: Pro customers get 5% savings on eligible purchases, while DIYers benefit from simplified rewards. The goal? Increase retention and cross-category spending.

  2. Rural Expansion and Store Growth
    Lowe's plans to open 10–15 new stores annually in fast-growing markets while expanding its rural store network to 150 additional locations by 2025. These stores now include categories like pet supplies and utility vehicles, addressing gaps in underserved areas. This strategy aims to lock in loyal customers in regions where Home Depot has less penetration.

Market Catalysts: When Will DIY Rebound?

The DIY recovery hinges on three factors:
- Interest Rates: Lower mortgage rates could reignite home renovation spending.
- Consumer Sentiment: Post-pandemic shifts toward experiences over goods have hurt retailers, but Lowe's omnichannel strategy aims to make DIY projects more accessible and affordable.
- Rebuilding Demand: Southern California wildfires in 2024 highlighted surging demand for home repairs—a trend that could accelerate if similar events occur elsewhere.

Lowe's is also betting on aging housing stock (the U.S. has 60 million homes over 20 years old) as a long-term driver of maintenance and renovation demand.

The Risks: No Free Lunch

Even with its strategies, Lowe's faces headwinds:
- Economic Uncertainty: 2024 comparable sales fell -3.0% to -3.5%, reflecting weak consumer spending. A prolonged recession could delay the DIY rebound.
- Competitive Pressure: Home Depot (HD) is also investing in AI and store expansions. The market’s duopoly means Lowe's must execute flawlessly.
- Supply Chain Costs: Tariffs on Canadian wood and other materials could eat into margins if not managed through Lowe's $1 billion annual cost savings program (Perpetual Productivity Improvement).

Conclusion: A Buy for the Long Game

Jefferies’ $316 price target (even after the March cut) reflects a belief that Lowe's can grow its sales to $86 billion by 2025, up from $83.5 billion in 2024. The company’s initiatives—AI tools, rural expansion, and loyalty unification—are designed to lock in customers during both booms and busts.

For investors, the key is patience. The DIY recovery isn’t here yet, but Lowe's is laying the groundwork. A buy rating makes sense if you believe in two things:
1. Consumer resilience: Americans will continue to prioritize home improvement despite economic cycles.
2. Lowe's execution: Its Total Home Strategy must deliver measurable results, like a rebound in comparable sales or a rise in rural store profits.

The data is clear: Lowe's has the tools to lead the recovery. The question is timing. If interest rates stabilize and rebuilding demand surges, this stock could hit Jefferies’ target—and then some. For now, it’s a hold with a bullish bias, waiting for the DIY spring to arrive.

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