Homebuilding Near-Term Deceleration Will Reward Stock Pickers, Analyst Offers Picks
On Tuesday, Barclays released a note on the homebuilding sector, moving towards a stock picking approach.
Analyst Stephen Kim downgraded shares of PulteGroup (NYSE: PHM) from Equalweight to Underweight and lowered the price target from $21 to $20. Kim's “top pick” is D.R. Horton (NYSE: DHI); he raised the price target from $25 to $27 and has an Overweight rating on the stock.
Kim “diagnosis for what's wrong with the housing cycle is that this recovery started at the higher-end - rather than the entry level - and strength in the housing market moves more easily UP the price spectrum than down.”
When looking long term, the housing sector's “growth prospects are hard to beat,” said Kim. “The next big move in the group will likely be up, not down,” said the analyst.
“Powerful long-term growth and a near-term deceleration in fundamentals will reward stock-picking over principle," Kim said.
Shares of Pulte are up 0.29 percent, while shares of D.R. Horton are up 1.4 percent.
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