In a report published Monday, J.P. Morgan analyst Michael Rehaut initiated coverage on LGI Homes LGIH with an Overweight rating and $19.00 price target.
In the report, J.P. Morgan noted, “We initiate coverage of LGI Homes with an Overweight rating and a Dec. 2014 price target of $19.00. Focused primarily on the entry-level first-time buyer, LGIH employs a unique and successful operating model, in our view, including a differentiated marketing and sales approach aimed at converting renters to homeowners, generally acquiring land further out within a metro area and building 100% on spec. We believe strong visibility exists for our order growth outlook over the next two years, based on the company's land position, land acquisition strategy and emerging, successful track record of entering new markets. Additionally, its strong gross margins are sustainable, in our view. Lastly, we believe LGIH's valuation is attractive, trading at only 5.0x our 2016 Earnings Power vs. our universe average of 6.2x, and note that our price target represents 23% upside potential, above our universe average of 19%. Hence we rate the stock Overweight relative to its peers amid our positive sector stance.”
LGI Homes closed on Friday at $15.40.
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