The firm said it is looking to take advantage of share weakness after the Mooresville, NC-based home improvement retailer posted lower-than-expected results for the 2016 second quarter.
"We remain positive on sustained big-ticket demand for home improvement and believe Lowe's will continue to benefit from supportive macro trends including rising home prices, housing turnover and new home formation," BofA/Merrill Lynch noted.
Lowe's completed a $2.4 billion acquisition of Canadian home-improvement chain RONA in May, which the company said was dilutive to results for the second quarter.
"We believe the market continues to underestimate synergies from the RONA acquisition and are encouraged by management's goal to double profitability within five years," BofA/Merrill Lynch added.
The firm said that it expects Lowe's comparable-store sales gap with Home Depot (HD) to narrow as product differentiation and resets help drive revenue.
Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.
TheStreet Ratings rated this stock as a "buy" with a ratings score of A-.
The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, notable return on equity and solid stock price performance. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.
You can view the full analysis from the report here: LOW