Billionaire hedge fund manager Bill Ackman, who runs Pershing Square Capital Management, sees the potential for further upside for Lowe’s stock price.

Mooresville, N.C.-based Lowe’s has seen its stock price surge 40 percent year-to-date, benefitting from an increase in demand for home improvement projects during COVID-19 lockdowns.

“Although it is difficult to know how much longer the elevated demand environment will persist, we believe the pandemic has provided Lowe’s with a unique opportunity to showcase its improved merchandising, greater in-stock levels, and excellent customer service to a growing base of customers. This should drive greater customer frequency and loyalty, leading to correspondingly higher same-store-sales and profit margins over the long term,” Ackman wrote in an investor update on Friday.

According to a recent securities filing, Pershing Square last held more than 12.7 million shares of Lowe’s, a stake valued at nearly $2.1 billion based on Friday’s closing stock price. According to Friday’s investor update, Pershing Square Holdings, the publicly traded vehicle, is up 44.1 percent this year, with Lowe’s contributing 11.7 percent of those gains year-to-date through Aug. 25.

In the letter, Ackman notes that Lowe’s has not only taken steps to keep up with the increased demand during the pandemic, but it’s also made strategic investments in its business transformation, including improving its omnichannel, ecommerce and supply chain infrastructure, that bodes well for future earnings growth.

“Despite Lowe’s significant stock price appreciation, it currently trades at approximately 19 times our estimate of Lowe’s next-twelve-month earnings (vs. Home Depot at 25 times), a valuation which does not reflect its potential for future profit improvement. As a result, we believe that Lowe’s share price has the potential to appreciate substantially as the company continues to make progress on its business transformation,” Ackman wrote.

Shares of Lowe’s (LOW) were last trading down 89 cents near $164.62 per share on Monday.