Lowe’s Says Not In Talks To Buy HD Supply; Street Sees 21% Upside

Lowe’s Companies announced on Monday that it not in discussions with HD Supply for an acquisition, putting media speculations to rest.

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In a statement, Lowe’s (LOW) said “While it is the Company’s practice to not comment on rumors or speculation, we believe it is important to note that Lowe’s is not in discussions with HD Supply and we have no plans to pursue a transaction with them.”

Earlier during the day, Bloomberg reported that the two companies were discussing a deal with advisers. Following the report, shares of Lowe’s and HD Supply gained nearly 2% and 13%, respectively, in Monday’s extended trading session. (See LOW stock analysis on TipRanks).

Commenting on the Bloomberg report, Wells Fargo analyst Zachary Fadem said that “our initial reaction is somewhat surprised, as we believe there are clear puts and takes on both sides of the coin.” Fadem believes a combination could enhance supply chain capabilities and bring back office efficiencies. He projects the transaction would be accretive to Lowe’s gross and EBITDA margins.

Fadem maintained a Buy rating on the stock with price target of $185 (20.6% upside potential).

Currently, the Street has a bullish outlook on the stock. The Strong Buy analyst consensus is based on 16 Buys and 3 Holds. With shares up over 28% year-to-date, the average price target of $185.50 implies further upside potential of about 20.9% to current levels.