Jefferies Names Top Pick in Home Improvement Stocks

FND's recent sell-off creates an attractive opportunity, according to the analyst

Aug 21, 2018 at 9:50 AM
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Jefferies named Floor & Decor Holdings Inc (NYSE:FND) its "top pick" among home improvement, furnishings, and decor stocks, saying the company is in the early stages of a growth cycle. The brokerage firm also upgraded FND stock to "buy" and boosted its price target to $48 -- a 31% premium to last night's close at $36.52, noting a recent sell-off creates an attractive entry point.

In reaction, FND shares are up 2.3% at $37.38, set to pare a portion of its 25% year-to-date deficit. More recently, the stock gapped lower on Aug. 2 after Floor & Decor reported weak second-quarter results and lowered its full-year profit forecast and same-store sales target, but found a foothold in the $36-$37 neighborhood -- which served as a floor late last year.

Against this backdrop, there's plenty of skepticism priced into Floor & Decor stock. While 13% of the equity's float is sold short -- or 9.7 times the average daily pace of trading -- half of the analysts covering the shares maintain a lukewarm "hold" rating.

Jefferies also took aim at Bed Bath & Beyond Inc. (NASDAQ:BBBY) and Lowe's Companies, Inc. (NYSE:LOW), lowering its price targets on the retail stocks to $19 and $118, respectively. For BBBY stock, the brokerage firm waxed optimistic on the company's Beyond+ membership program, but said it needs to see results before it adjusts its "hold" rating.

For Lowe's, meanwhile, Jefferies believes a recent shift in leadership should help lessen the company's underperformance relative to sector peer Home Depot (HD). The firm reiterated its "buy" rating on LOW stock ahead of the retailer's earnings report, due out ahead of the open tomorrow, Aug. 22.

At last check, BBBY was down 0.2% to trade at $18.15 -- holding below recent resistance at its 80-day moving average. LOW stock, meanwhile, is up 0.8% to trade at $99.75 amid broad-market tailwinds. Lowe's is still struggling against the century mark, though, which contained a rally attempt earlier this month.

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