Toll Brothers stock trends higher following Bank of America upgrade
Shares of Toll Brothers are up after Bank of America upgraded the stock to Buy and bumped its price target to $68.
Video Transcript
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- My play is Toll Brothers-- Bank of America upgrading the home builder to buy from neutral with a $68 price target. That is well up from $54. Analyst Rafe Jadrosich writing, quote, "in 2023, we are cautious on housing demand, especially in the first half of the year, but we see a more favorable setup for homebuilder stock performance for a few reasons."
Now, chief among those reasons the mortgage rates, which have come back down from their peak north of seven and should continue to see some relief throughout the year. Jadrosich also believes homebuilder valuations have already priced in weak demand and home price depreciation.
Toll Brothers stock up just about 3% today and nearly 10% this year. Its biggest competitor, Lennar, also got a nice bounce today and is up 7% this year. So we hear a lot of bad news, Seana, in the housing sector, but the homebuilders look like they may be starting to turn a corner because of what's priced in.
- Yeah, and Bank of America positive on a couple of those names. You mentioned the stock-- mentioned the reaction that we're seeing Lennar. They also upgraded Lennar today. They also upgraded PulteGroup. NVR is their top pick within the sector, just given the fact that that company has performed historically well when the housing market has been relatively weak or in a weaker position than it has been over the last couple of years.
So it seems like things are going to improve for housing. I think the key question-- and we have talked about it so many times-- is just when, of course, rates are going to come down substantially. When we will see that 30 year drop to closer to 5-- that 6% range. And then if, in fact, that will be enough to kind of bring some of those people who have been staying on the sidelines, some of those potential buyers, back into the market. We'll see.
