TOL - Re-rating homebuilders: Raymond James upgrades Toll Brothers Lennar

2023-07-14 11:45:01 ET

Raymond James on Friday upgraded its ratings on five homebuilder stocks, as the companies' resilience to rates are poised to continue.

Toll Brothers ( NYSE: TOL ) was upgraded to Strong Buy from Outperform and its price target was hiked to $100 from $77, implying 22% potential upside to its last close.

Lennar ( NYSE: LEN ), PulteGroup ( PHM ), KB Home ( KBH ), and M.D.C. Holdings ( MDC ) were all raised to Outperform from Market Perform.

"We are keenly aware that the optics of turning more positive on homebuilders after the group has already achieved a new all-time high is far from ideal," said analyst Buck Horne. "But we must always reassess what we missed earlier."

Horne said his team "belatedly came to the realization that the magnitude of pent-up demand for single-family homes – coupled with the proven resilience of builders' de-risked operating models – warrants a refreshed valuation approach."

Price targets: Lennar ( LEN ) $150 (15.3% potential upside), PulteGroup ( PHM ) $93 (15.7% potential upside), KB Home ( KBH ) $61 (15.2% potential upside), and MDC Holdings ( MDC ) $55 (16.1% potential upside).

SA Quant has Hold ratings on TOL , LEN , PHM , KBH and MDC .

More analyses on homebuilders

• Homebuilders: Why This Time Was Different
• Lennar Hits All-Time High Before Q2 Earnings: A Closer Look
• PulteGroup: No Margin Of Safety Based On A Cyclical Perspective
• KB Home Has Doubled - What Earnings Tell Us About Risk/Reward
• M.D.C. Holdings: Not The Best Financially But Has A Margin Of Safety

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