NEW DIRECTIONAL CALL PLAYS
Lowe's Companies - LOW - close: 69.85 change: -0.59
Stop Loss: 65.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 5.3 million
Entry on January -- at $---.--
Listed on January 27, 2015
Time Frame: Exit PRIOR to earnings on Feb. 25th
New Positions: Yes, see below
Why We Like It:
Lowe's Companies is a Fortune 100 company. They sell to 15 million customers a week with annual sales of more than $53 billion. LOW is the second biggest player in the home improvement retail business. Their main rival is Home Depot. LOW currently has more than 1,800 stores across the United States, Canada, and Mexico.
The stock has been a great performer the last couple of years, significantly outperforming the broader market. Their most recent earnings report was November 19th and results were one cent above expectations with a profit of $0.59 a share. Revenues also beat expectations with +5.6% growth to $13.68 billion. Same-store sales were up +5.1%.
Management issued bullish guidance for 2015 and raised their earnings estimate above Wall Street's forecast. LOW also raised their revenue guidance above analysts' estimates. The company expects revenues to grow +4.5% to 5% in 2015 with same-store sales growth in the +3.5% to 4% range.
The stock is often influenced by trading and news out of the homebuilders. This year there have been a couple of bombs in the homebuilding industry with both KBH and LEN warning on potential margin pressures in 2015. Shares of LOW, a retailer, shrugged off this headlines.
The U.S. economy grew +4.9% in the third quarter last year and is expected to grow about +3% in 2015. The slow and steady improvement in the U.S. economy is a tailwind for LOW. Another bonus is low gas prices. While we have not seen a lot of evidence that consumers are spending their savings at the pump eventually that money, amounting to hundreds of dollars a year for the average driver, will be spent. Americans love to spend money on their homes, which is bullish for LOW.
We are quickly approaching the spring residential real estate selling season. That means consumers will be spending money on fixing up their homes to go on the market. Those people who buy a home will spend money on their new purchase.
Technically LOW's stock has been consolidating sideways between support near $65 and resistance near $70 the last few weeks. The point & figure chart has already produced a new triple-top breakout buy signal with a $75 target (that could grow). Yesterday the stock hit an intraday high of $70.50.
Tonight I am suggesting a trigger to buy calls if LOW hits $70.60.
Trigger @ $70.60
- Suggested Positions -
Buy the MAR $70 CALL (LOW150320C70) current ask $2.37
Option Format: symbol-year-month-day-call-strike