Nvidia’s results, Indian tariffs, French markets - what’s moving markets
On Monday, Seaport Global Securities analyst Kenneth Zener revised the rating for LGI Homes (NASDAQ:LGIH), moving it from Sell to Neutral. The adjustment follows a period of reflection on the housing sector's prospects after a notable fourth-quarter sell-off in 2024. For investors seeking deeper insights into the housing sector, InvestingPro offers comprehensive analysis of over 1,400 US stocks, including detailed financial health scores and Fair Value assessments. Zener's current stance remains cautious, citing several factors including regional margin risks, an increase in new housing supply, and valuations that are still 15-20% above their lowest points, despite a negative earnings outlook.
The analyst acknowledged the sector's recent 20% decrease in value, which is 24% relative to the S&P, adding that a potential reevaluation of the sector's worth could occur due to reduced leverage and improved return on equity post-Covid. Zener's cautious outlook is influenced by a macroeconomic perspective that suggests a strong economy reduces the justification for rate cuts, a view shared by economists Torsten Slok and James Grant.
In addition to the LGI Homes upgrade, Zener has made several other adjustments within the housing sector. PulteGroup (NYSE:PHM) and Taylor Morrison Home Corporation (NYSE:TMHC) were both downgraded to Sell from Neutral, with an anticipated downside of around 15%, particularly due to their exposure to the Florida market. Meritage (NYSE:MTH) Homes Corporation's (MTH) price target was reduced to $70, reflecting its higher exposure to speculative closings.
Furthermore, the analyst upgraded Toll Brothers (NYSE:TOL), noting the company's improved position in California post-wildfires, and LGI Homes to Neutral from Sell. The latter's upgrade is based on valuation grounds. InvestingPro data shows Toll Brothers trading at an attractive P/E ratio of 8.88, with strong revenue growth of 8.52% and an impressive current ratio of 5.03. The company maintains a "GREAT" financial health score of 3.38, with InvestingPro analysis indicating the stock is currently undervalued. Additionally, InvestingPro has identified 8 more key investment tips for Toll Brothers subscribers. Lastly, D.R. Horton's (DHI) estimates were revised following its recent earnings release, reflecting the latest financial data. For comprehensive analysis of homebuilder stocks and access to detailed Pro Research Reports that transform complex Wall Street data into actionable intelligence, visit InvestingPro.
In other recent news, Toll Brothers has been a focal point in recent developments in the homebuilding sector. Amid the devastating Los Angeles wildfires, shares of Toll Brothers saw a significant increase, reflecting an expected surge in demand for home reconstruction in the affected areas. In response to Toll Brothers' fourth-quarter results, which exceeded expectations, Raymond (NSE:RYMD) James revised the company's price target from $170 to $165, maintaining a strong buy rating.
Simultaneously, RBC Capital Markets raised its price target for Toll Brothers from $143 to $150, keeping an outperform rating, based on anticipated growth in the company's earnings per share for fiscal year 2025. However, JPMorgan downgraded the stock from overweight to neutral and reduced its price target to $150, citing concerns about future market conditions for homebuilders.
RBC also noted mixed pricing patterns in the homebuilding sector for November, with Toll Brothers experiencing slightly weaker base pricing but less negative spec pricing trends. These recent developments highlight the dynamic and evolving landscape in the homebuilding sector, with Toll Brothers at the center of investor attention.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.