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Investing.com -- Seaport Research has upgraded homebuilding stocks, with analyst Ken Zener pointing out that valuation and operating metrics could lead to an approximately 27% upside for the group.
Zener has increased the ratings for D.R. Horton, Lennar (NYSE:LEN), KB Home (NYSE:KBH), M/I Homes (NYSE:MHO), and Tri Pointe Homes (NYSE:TPH) from neutral to buy. Additionally, Meritage (NYSE:MTH) Homes, PulteGroup (NYSE:PHM), and Taylor Morrison (NYSE:TMHC) Home have been raised to neutral from sell.
Despite fundamental challenges such as increased new home supply, declining housing starts, and margin pressure, Zener emphasizes that Seaport’s sector bias/rotation takes precedence.
Since Seaport downgraded the sector in September 2024, homebuilders have seen a 34% drop compared to the S&P 500 Index, according to a note Zener wrote to clients on Wednesday.
He suggests that this decline supports Seaport’s current positive sector call, particularly as later cycle sectors experience similar downside but don’t offer the same potential for upside when the market changes direction.
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