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On Monday, DA Davidson made an adjustment to the price target of Builders FirstSource (NYSE:BLDR), a supplier of building materials, construction services, and manufactured components for the housing industry. The firm reduced the price target from $157.00 to $147.00 while maintaining a Neutral rating on the stock. According to InvestingPro data, BLDR is currently trading near its 52-week low of $122.49, with the stock down about 36% over the past six months. The company’s current market capitalization stands at approximately $13.9 billion, and analysis suggests the stock may be slightly undervalued at current levels.
Kurt Yinger of DA Davidson cited the reasoning behind the price target change. After recent investor meetings with the management of Builders FirstSource, the firm decided to slightly lower the price target. Yinger noted that near-term (NT) demand appears sluggish, but the management team conveyed a steady outlook for single-family (SF) housing starts in 2025, expecting them to be flat to slightly down. This outlook comes as InvestingPro data shows the company maintaining strong financial health with a "GOOD" overall score, particularly excelling in profitability metrics.
Despite the tempered demand expectations, Builders FirstSource’s management expressed confidence in their ability to maintain gross margins. The company’s last twelve months gross margin of 32.8% supports this confidence. The company is focused on digital innovation and installation services as key drivers for both near-term and long-term growth. Moreover, they are adopting a more aggressive stance to defend market share, supported by strong liquidity with a current ratio of 1.77.
Yinger’s commentary highlighted that nothing indicated a significant drop in demand in reaction to the levels of new home inventory. This suggests that the market for Builders FirstSource’s products remains relatively stable despite the current demand slowdown.
The analyst also reaffirmed the company’s gross margin guidance for the full year, which is expected to be between 30% and 32%. This indicates that Builders FirstSource is comfortable with its profitability outlook, even as it adjusts to market conditions and competitive pressures.
DA Davidson’s revised price target reflects a nuanced view of Builders FirstSource’s market position and strategic initiatives, taking into account the current economic environment and the company’s operational focus areas.
In other recent news, Builders FirstSource reported mixed financial results and received several analyst adjustments. The company experienced a high single-digit decline in overall sales for the fourth quarter of 2024, with single-family sales down by 7% and multi-family sales decreasing by 29%. Despite these challenges, Builders FirstSource achieved higher-than-expected gross margins. The company issued its full-year 2025 guidance with projected adjusted EBITDA between $1.9 billion and $2.3 billion, which did not meet the midpoint of consensus estimates.
BMO Capital Markets reduced its price target for Builders FirstSource from $175 to $168, maintaining a Market Perform rating due to concerns over a challenging housing market. Loop Capital also lowered its price target from $205 to $190, while keeping a Buy rating, citing the company’s strong margins as a positive factor. Stifel adjusted its price target to $156 from $175, maintaining a Buy rating and highlighting the importance of market stabilization for future performance.
Jefferies, meanwhile, decreased its price target from $200 to $180 but retained a Buy rating, noting Builders FirstSource’s strong fourth-quarter performance and potential for adjusted EBITDA growth in 2025. Despite the various price target revisions, analysts generally remain optimistic about Builders FirstSource’s ability to navigate the current market conditions. Each firm highlights different aspects of the company’s financial health and market potential, providing investors with varied perspectives on the stock’s outlook.
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