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Investing.com -- MJ Gleeson (LON:GLEG) slumped on Tuesday after the British affordable housing company said that its low-cost housebuilding unit, Gleeson Homes, is expected to report an annual operating profit that’s 15%-20% below expectations.
The company cited increased construction costs, stagnant selling prices, and a failed land disposal deal as reasons for the lower than expected profit.
Following the announcement, the stock dropped 20.5%.
Gleeson Homes has been facing several challenges throughout the year. The company stated that the recovery rate of the housing market has not been sufficient to offset the cumulative impact on Gleeson Homes’ gross margin.
In addition to the aforementioned issues, the company also pointed out other factors that will continue to affect the unit’s margins into fiscal year 2026.
One such factor is planning delays, which will result in the business selling from fewer sites than initially forecasted.
RBC analysts said the update is clearly negative ahead of MJ Gleeson’s year-end on June 30, 2025, and expected the stock to come under pressure as the market absorbs the news.
While RBC’s 650p price target suggests a potential upside of 26% (vs. sector average of 17%), they believe today’s announcement is likely to widen the stock’s discount to book value.