Market Overview

Susquehanna Upgrades Lennar; Sees Attractive Entry Point At Current Levels

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  • Lennar Corporation (NYSE: LEN) shares have been trending south over the past month, and are down 16 percent since January 4.
  • Susquehanna’s Jack Micenko maintained a Positive rating for the company, with a price target of $53.
  • Homebuilding and ancillary business trends indicate material upside in Lennar’s shares in the future, Micenko stated.

Analyst Jack Micenko mentioned that Lennar’s shares have historically traded at a premium to the peer group; however, the premium has narrowed in recent weeks. The analyst considers the current stock valuation of Lennar as an attractive entry point to a reputable homebuilder.

Micenko expects Lennar’s shares to appreciate based on “trends in both the core homebuilding business as well as upside from ancillary businesses that will contribute more meaningfully in 2016.”

Lennar has guided to flat to a modest y/y decline in its margins for the next year. The company, however, tends to “under promise and over deliver,” the analyst pointed out.

Micenko believes that the company is poised to record robust gross margins since its low-cost basis land, acquired between 2009-2011, will help offset the impact of rising labor costs. The company’s greater focus on margins is appreciable.

Management focus on making the company a more asset efficient builder in a capital intensive industry has paid off. The analyst noted that “after bulking up on owned lots in the crisis,” the company has now employed a “soft pivot” to its building strategy which has not only improved returns, but also lowered leverage.

Latest Ratings for LEN

DateFirmActionFromTo
Sep 2020SusquehannaUpgradesNeutralPositive
Sep 2020B of A SecuritiesMaintainsNeutral
Sep 2020Wells FargoMaintainsOverweight

View More Analyst Ratings for LEN
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Posted-In: Jack Micenko SusquehannaAnalyst Color Long Ideas Reiteration Analyst Ratings Trading Ideas

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