Toll Brothers (TOL) Stock Gets a Boost: Analyst Sees a Buying Opportunity
Wedbush analyst Jay McCanless has upgraded Toll Brothers, Inc. (TOL) to Outperform from Neutral, raising his price target to $175 from $148. McCanless sees the recent dip in the company’s stock price, driven by rising mortgage rates, as a prime buying opportunity.
Despite the headwinds, McCanless remains optimistic about Toll Brothers’ prospects. He points to several key factors supporting his bullish outlook:
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Strong Demand:
The recent positive demand commentary from Toll’s publicly traded competitors suggests that the housing market remains healthy, despite the challenges posed by higher borrowing costs.*
Unique Buyer Profile:
McCanless highlights that Toll’s average buyer is less sensitive to monthly payments compared to buyers of other homebuilders. These affluent customers are more focused on their overall financial situation and less impacted by fluctuating mortgage rates.*
Pricing Power:
Toll Brothers has demonstrated its ability to maintain pricing power, as evidenced by the analyst’s raised gross margin forecast for fiscal year 2025 to 26.8%.Fourth Quarter Outlook
McCanless has also raised his unit closing estimate for the fourth quarter of fiscal 2024 to the upper end of Toll’s range of 3,275 to 3,375 units. While there may be some hurricane-related risks associated with this higher estimate, the overall impact of Hurricanes Milton and Helene appears to have been minimal.
Financial Projections
Reflecting his positive outlook, McCanless has also increased his revenue and earnings per share (EPS) estimates for fiscal year 2025. He now projects revenue of $10.735 billion and EPS of $15.00, up from his previous estimates of $10.670 billion and $14.86, respectively.
Price Action
Despite the analyst upgrade, TOL shares were trading lower by 1.11% to $149.04 at the close of trading on Friday.
Key Takeaways
* Wedbush analyst Jay McCanless believes the recent dip in Toll Brothers’ stock due to rising mortgage rates presents a buying opportunity.
* He points to strong demand from Toll’s competitors and the company’s ability to maintain pricing power, leading to an upgrade to Outperform and a price target increase to $175.
* McCanless also raised his unit closing estimate for the fourth quarter of fiscal 2024 and increased his revenue and EPS estimates for fiscal year 2025.