Oppenheimer analysts updated their research coverage on retailers, with both Home Depot (NYSE:HD) and Lowe’s (NYSE:LOW) downgraded from Outperform to Perform.
The move comes as a result of “a more cautious, near-term stance” toward the home improvement retail sector, although the investment firm’s long-term sentiment remains optimistic.
“We stay upbeat upon longer-term prospects for the sector and leading operators. That said, we are fretting that shorter-term market positioning towards HD and LOW is turning too complacent,” analysts wrote.
The analysts added that there is a risk that stock prices may not sufficiently account for potential ongoing challenges in the chains in the earlier part of FY24 (January 2025).
Moreover, the forthcoming initial guidance for 2024 from the two retailers has the potential to act as negative triggers for their respective stock prices.
“Investors looking to play prospects for strengthening trends in the sector, and at HD and LOW, beginning later in 2024, are likely to be presented better entry points, in coming weeks and months.”
For those reasons, Oppenheimer reduced its price targets for HD and LOW to $345 from $360, and to $230 from $275, respectively.
HD fell 0.6% in premarket trading Monday, while LOW slid over 0.7%.