Lowe's (LOW) Stock Forecast & Price Target

Lowe's Companies has demonstrated improvements in gross margins, which increased by 50 basis points year-over-year to 34.2%, largely due to favorable product mix changes and enhanced inventory management practices. The retailer's total sales grew by 3.2% to $20.8 billion, supported by strong performance in big-ticket items and the introduction of a home improvement-focused Marketplace that leverages customer data for broader product offerings. Additionally, the company has successfully expanded its professional client base to 30% of sales, positioning itself for continued growth in the domestic home improvement market.

Lowe's Companies has experienced a significant reduction in inventory, down $400 million year-over-year to $17.2 billion, driven by the implementation of AI-driven productivity solutions, although potential higher tariff costs could pressure inventory levels in the coming quarters. Despite the company's continued focus on expanding into professional business clients, operating margins are anticipated to contract by 20 basis points in 2025 and an additional 30 basis points in 2026, influenced by the lower margins associated with recently acquired businesses. Furthermore, ongoing challenges such as slowing sales growth, correlated with employment trends, and the impact of interest rate fluctuations could hinder Lowe's margin expansion efforts, prompting downward revisions to EPS estimates for 2025 and 2026.