Landsea Homes stock rating cut following acquisition deal

Published 13/05/2025, 12:36
Landsea Homes stock rating cut following acquisition deal

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.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2025 - Fusion Media Limited. All Rights Reserved.