Wedbush Upgrades Lennar Amid Favorable Homebuilder Market

Wedbush downgraded homebuilding company Lennar Corporation LEN in February, but the research firm sees multiple reasons why a bullish stance can be warranted again.

The Analyst

Wedbush's Jay McCanless upgraded Lennar from Neutral to Outperform with a price target lifted from $50 to $62.

The Thesis

Mortgage rates are not only near two-year lows but sitting at or below 4%, McCanless said in the note. It "doesn't take a rocket science" to conclude this is favorable for buyers. In addition, weekly purchase mortgage applications moved higher in the most recent week's findings with an 11% year-over-year gain versus the mid-to-low single-digit gain seen in the past eight weeks.

McCanless said existing home sales trends for notable regions in California shifted from a double-digit percentage decline in early 2019 to positive territory as of April. This is notable as an estimated 15% of Lennar's community count can be found in California.

Lennar will face "relatively easy" order growth comparisons and a resumption in community count development in the fiscal third quarter will help Lennar, according to McCanless.

The firm sees favorable factors in the homebuilding sector supporting a higher multiple for individual stocks.

Price Action

Shares of Lennar were trading higher by 2% to $53.07 Thursday afternoon.

Related Links:

Raymond James Downgrades Lennar On Valuation, Still Likes Long-Term Prospects

Wedbush Talks Homebuilders Ahead Of Next Week's Busy Schedule