BofA sees favorable setup for homebuilders, turns bullish on Pultegroup, Toll Brothers

M/I Homes

11/01/2023 16:19

** U.S. homebuilder stocks underperformed last year but BofA
Global Research says it sees more favorable setup for group in
2023 with lower  mortgage rates on the horizon, raises
Pultegroup Inc  PHM.N  and Toll Brothers Inc  TOL.N  to "buy"
from "neutral"
    ** PHM's shares up 1.9% at $49.36 on Weds, and TOL's stock
up 2.5% at $49.36
    ** Valuation for PHM compelling, BofA says, noting "limited
risk of writedowns for PHM after the company re-underwrote all
land deals based on current prices and demand in October when
mortgage rates were at peak levels"
    ** Boosts PT on PHM to $60 from $46
    ** BofA raises TOL PT to $68 from $54, saying co "will face
incremental headwinds from incentives and mix shift through the
year, but this will be offset by tailwinds lower input costs,
especially lumber"
    ** Brokerage also upgrades Lennar Corp  LEN.N  to "neutral"
from "underperform"
    ** PHLX Housing index  .HGX  last up 1.8% on the session and
at highest levels since last Mar
    ** HGX now up ~7% to start 2023. Last year, HGX lost 24% as
inflation and recession worries crimped demand for homes, while
the S&P 500  .SPX  fell ~19%
 (Lance Tupper is a Reuters market analyst. The views expressed
are his own)
 ((lance.tupper@thomsonreuters.com
lance.tupper@tr.com 1-332-219-1430))