BofA update shows where active managers are putting money
On Tuesday, Oppenheimer analysts downgraded Landsea Homes Corp. (NASDAQ:LSEA) stock from Outperform to Perform in light of the recent acquisition announcement by New Home Co. The stock has shown significant momentum, gaining nearly 21% in the past week according to InvestingPro data, with current trading at $7.01. The analysts noted that the acquisition agreement, which was revealed on Monday, involves a purchase price of $11.30 per share, valuing the company at an enterprise value of $1.2 billion. This represents a significant premium to the company’s current market capitalization of $255 million, with InvestingPro analysis showing the company maintains strong liquidity with a current ratio of 8.09.
The deal has garnered support through a $650 million cash equity commitment from Apollo Funds, which is New Home’s principal shareholder. Analysts at Oppenheimer believe that the transaction is likely to be successful due to Apollo’s backing. They commented on the valuation of the deal, stating it appears reasonable as it represents 80% of their fiscal year 2025 tangible book value per share and 11 times their fiscal year 2025 earnings per share estimate.
The analysts also expressed their view that the transaction is beneficial for small-cap builders, citing Beazer Homes USA, Inc. (NYSE:BZH) as an example, which is trading at just over 50% of calendar year 2025 book value per share. The positive outlook for small-cap builders is seen as a ripple effect of the acquisition. Notably, Landsea Homes currently trades at just 0.38 times book value, with annual revenues of $1.55 billion and a beta of 1.61, indicating higher market sensitivity than average. For deeper insights into homebuilder valuations and more exclusive metrics, investors can access comprehensive analysis through InvestingPro’s detailed research reports.
In response to the acquisition price closely aligning with their previous price target, Oppenheimer analysts have decided to rescind their $11 price target for Landsea Homes. They emphasized that since the proposed acquisition price is near their prior target, they are adjusting their rating to Perform from Outperform, signaling a neutral stance on the stock’s outlook.
In other recent news, Landsea Homes Corporation reported its fourth-quarter earnings, revealing a shortfall in expectations. The company posted earnings per share of $0.25, missing the forecasted $0.38, and revenue of $450.6 million, which was below the anticipated $527.15 million. Despite these misses, Landsea Homes achieved a record annual home sales revenue of $1.5 billion in 2024. Looking ahead, the company plans to deliver between 3,000 and 3,400 new homes in 2025, indicating a projected growth of 13%.
Additionally, Landsea Homes received a notice from investor Mill Road Capital III, L.P. about its intent to nominate three candidates for election to the company’s board at the upcoming 2025 Annual Meeting of Stockholders. The board plans to evaluate these nominees and will provide formal recommendations in its proxy materials. In another development, Landsea Homes has been working on reducing its standing inventory and improving operational efficiencies, such as decreasing construction cycle times to approximately five months. The company ended the fourth quarter with $241.8 million in liquidity.
Analysts from firms like Barclays (LON:BARC) and BTIG have inquired about the company’s strategies for managing market challenges and improving margins amidst competitive pressures.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.