Will Lowe's Come Back? Bear Stearns' Nutty Theory

Stocks:  (LOW)(HD)

According to Barron’s, the analysts at Bear Stearns think that things are about to get much better at household goods retailer Lowe’s.  Bear Stearns has put a new target on the stock of $39. The stock trades at $31.39 now, and has a 52-week high of $34.85. To trade at $39, Lowe’s would have to hit an all-time high. This is for a stock that has underperformed Home Depot this year.

Part of Bear Steans’ argument is that 2007 comparisons to 2006 figures will be good, because 2006 numbers were weak, especially as the year went on. One would think most investors would see through this and look for absolute and not relative financial numbers.

The core of Bear Stearn’ thesis is that housing will stabilize as it moves into the second half of 2007. That may be true, but the evidence for the assertion is still very weak.

Lowe’s stock has already run from $28 in late September to its current price, an increase of about 25%. Is there another 25% in the stock to take it to the highest level since the company became public.

Probably not.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.