Morgan Stanley starts US homebuilders with cautious view, flags affordability worries
XLY•Morgan Stanley initiated coverage of US homebuilders with a cautious industry view, citing affordability, incentives and margin pressure. It rated Toll Brothers overweight at a $159 price target, D.R. Horton and PulteGroup equal weight, and Lennar, KB Home and NVR underweight.
1. Ratings and concerns
Morgan Stanley said affordability concerns keep existing-home sales range-bound, limit resale supply and continue to pressure new housing, while lower mortgage rates improve affordability. It started Toll Brothers with an overweight rating and a $159 price target, citing its affluent, less rate-sensitive customer base and strong pricing power. D.R. Horton and PulteGroup received equal-weight ratings with price targets of $151 and $128; Lennar, KB Home and NVR were rated underweight with targets of $65, $39 and $5,058, respectively.
