LGIH - LGI Homes stock slides after downgrade to Sell at BTIG on high valuation

• LGI Homes ( NASDAQ: LGIH ) stock gapped down as much as 3.5% in Wednesday premarket trading after BTIG downgraded shares of the homebuilder to Sell from Neutral on the basis of its high relative and absolute valuation.
• Trading at 1.5 times book value, LGIH carries a 36% premium to peers, analyst Carl Reichardt wrote in a note. The stock climbed 10.1% since the start of 2023, but slid 13.3% over the last year.
• He also pointed to "potential risk to margins and volumes. We believe LGIH's customer base is the most sensitive to rates among all the builders we cover, making our EPS estimates potentially more fragile."
• In turn, Reichardt lowered his 2023 EPS estimate to $7.20 from $8.55 given gross margin "is likely to compress more steeply than we had originally anticipated to get to volume goals." That compares with the average analyst estimate of $9.00 (six estimates).
• The downbeat coverage comes on the heels of LGI Homes ( LGIH ) posting weaker-than-expected profit and sales for the fourth quarter, reflecting lower gross margin and unit orders.

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