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On Wednesday, Citizens JMP analyst Aaron Hecht adjusted the price target for LGI Homes (NASDAQ:LGIH) to $140.00, a decrease from the previous target of $160.00. Despite the reduction, Hecht upheld a Market Outperform rating for the company’s stock. The stock, currently trading at $77.91, sits near its 52-week low of $75.91. According to InvestingPro data, the company maintains strong fundamentals with a P/E ratio of 9.48.
LGI Homes recently disclosed earnings with a diluted EPS of $2.15, which surpassed Citizens’ projection of $2.02 but did not meet the broader market consensus of $2.18 per share. The performance relative to Citizens’ estimate was attributed to a net margin that exceeded expectations by 70 basis points. InvestingPro analysis shows the company remains profitable with a trailing twelve-month EPS of $8.30 and maintains exceptional liquidity with a current ratio of 14.42.
The company also provided its financial outlook for FY2025, anticipating home sales and margins that fall below both consensus and Citizens’ earlier estimates. High interest rates and general affordability challenges have impacted LGI Homes, particularly due to the company’s rental price points. These affordability issues are expected to continue into 2025, and the company plans to implement incentives to help buyers qualify for purchases, though this strategy may negatively affect profitability and margins.
Hecht noted that while the near-term outlook presents challenges for LGI Homes, there is an expectation that rental rates will climb as 2026 approaches. This anticipated increase in rental costs is projected to reduce the affordability gap between renting and home buying, potentially offering a more favorable environment for LGI Homes.
In other recent news, LGI Homes reported its fourth-quarter 2024 earnings, which fell short of analysts’ expectations. The company posted an earnings per share (EPS) of $2.15, missing the forecasted $2.35, and reported revenue of $557.4 million, below the expected $645.65 million. Despite these misses, LGI Homes’ stock experienced a notable rise, reflecting investor confidence in the company’s strategic direction. LGI Homes also announced the opening of 80 new communities in 2024, increasing its active communities by 29%. The company reported a full-year revenue of $2.2 billion, a decrease of 6.6% year-over-year, with a net income of $196.1 million. Analysts from Wolfe Research and BTIG discussed the company’s challenges, including affordability and high mortgage rates, which could impact future sales. LGI Homes plans to close between 6,130 and 6,530 homes in 2025, with an average sales price projected between $360,000 and $370,000. The company remains focused on strategic investments to support growth amid economic uncertainties.
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