Wedbush Upgrades Taylor Morrison Home, Says Company's National Transformation Underappreciated

Through acquisitions over the past four years, Taylor Morrison Home Corp TMHC has transformed from a builder focusing only on the West Coast into a national builder. This seems to be underappreciated by the market, according to Wedbush.

The Analyst

Jay McCanless upgraded Taylor Morrison Home from Neutral to Outperform and raised the price target from $22 to $24.

The Thesis

Like most other builders, Taylor Morrison Home has in-house mortgage companies, McCanless said in the upgrade note. (See his track record here.)

Field checks in multiple markets suggest the company has been more proactive in using mortgage incentives to stimulate demand, the analyst said. 

The proactive use of such financing options enabled the company to record first-quarter orders, closings and gross margins ahead of Wedbush’s estimates, he said. 

Less than 10 percent of Taylor Morrison Home’s communities are in California, McCanless said. Demand and competitive trends are favorable for builders in the five cities where the company has the largest presence, he said: Dallas, Houston, Phoenix, Orlando and Charlotte.

Active adult and affordable categories are currently the volume and revenue generators, the analyst said, adding that Taylor Morrison Home’s land acquisition efforts are focused on growing these categories, which should be remain the company’s sales engines going forward. 

Price Action

Taylor Morrison Home shares were up 0.44 percent at $20.48 at the time of publication Monday. 

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