Lowe’s Companies, Inc.: One Month Later, Update on LOW Options

We continue with our exploration of possibilities in the retail industry in anticipation of greater gains in 2015 as we explore retail stocks. Today, we will check out retail players in the home improvement sector and our first port of call today is Lowe’s Companies, Inc. (NYSE:LOW).

Lowe’s with its market capitalization of $64.64B is the world’s second largest home improvement retailer.  The company serves homeowners, renters and commercial business customers. Individual homeowners and renters complete an array of projects and vary along the spectrum of do-it-yourself (DIY) and do-it-for-me (DIFM). Commercial business customers include those who work in construction, repair/remodel, commercial and residential property management, or business maintenance professions.

Update on Previous LOW Coverage

I last wrote about trading LOW options about a month ago in a November post titled “When LOW Calls are courting The Highs.” In that post, I mentioned the possibility that shares of Lowe’s will rise to new highs on the release of strong third quarter results. Shares of Lowe’s were trading around $58.21 per share when I wrote that piece and I recommended the LOW Jan 2015 60.000 call (LOW150117C00060000) at an asking price of $1.25.

As at 12:17PM EST today, shares of Lowe’s were up 2.81% to $66.96 after making a new 52-Week high of $67.12. In addition, shares of Lowe’s have recorded a 15.03% gain to $66.96 up from the $58.21 trading price when I wrote that piece in November. In addition, the LOW Jan 2015 60 call options that I recommended at an asking price $1.25 was trading at an asking price of $5.77 to mark an unbelievable 361.59% in less than one month.

Why We are Looking at Lowe’s Today

Lowe’s caught my attention today after rising 2.81% to the new lifetime high of $66.96 to set the stock at a 51.73% premium to its 52-week low of $44.13. The gain reported in shares of Lowe’s today comes at the heels of increased investor confidence after the company held its Analyst & Investor Conference.

One of the key takings from Lowe’s Investor confidence is that the company expects its fiscal 2014 EPS to come in at $2.68 per share, which is better than consensus of estimate of $2.67 per share. In addition, the company expects its Total FY 14 sales to grow between 4.5% and 5.5%. The company’s comp sales forecast expects growth from 3.5% to 4.0%.

Comparative Performance

LOW Chart

The chart above shows how the shares of Lowe’s have traded in the last one year. The chart also compares Lowe’s performance with its bigger rival, Home Depot (HD) and the broader market as represented in the S&P 500.

You will observe that shares of Lowe’s have outperformed both the S&P 500 and Home Depot in the last one year. Shares of Lowe’s have gained an impressive 38.83% in the last one year; by comparison, shares of Home Depot have gained 27.55% while the S&P 500 has gained a mere 12.91% within the same period.

How to Trade LOW Options

Without much ado, the smartest move on the aforementioned LOW Jan 2015 60.000 call contract will be to sell the contract to close and keep the 361% gains. However, you can open yourself up to more gains by using a stop/limit order at $5.60 to lock in profits. If you are new to the LOW options party, you should definitely consider buying the LOW Apr 2015 62.500 call (LOW150417C00062500) at an asking price of $5.30

— Daily Option Alerts

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