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Lennar Continues to Buy as Citi Sees Sharp Corrective Demand in 2023, but Doesn’t Crash


Perspective inside the house under construction

photo/iStock via Getty Images

Citi analyst Anthony Pettinari continued his coverage of home builder Lennar (NYSE:WOOL) with a Buy rating, arguing that housing demand will correct sharply next year, though not completely collapse.

While Pettinari waits Housing market conditions will deteriorate further over the next few quarters, he sees a “sequential improvement in net orders” in the second half of 2023 with the prospect of a mid-year recession and “inventories”. little housing stock in history”.

LEN’s stock, meanwhile, appears to be “priced close to collapse,” changing hands at 1.1 times tangible book value over the next 12 months versus 1.5 times the average. 10 years, the analyst explained. Stocks rise 9.4% for the past six months, but off 22.5% annual.

Overall, LEN stock has an attractive risk-reward setup for the coming year thanks to its “defensive balance sheet (~11% net ceiling debt), strong options position (63% of controlled via options) and ’23 generates FCF (estimated ~ $11/share),” according to the note.

Pettinari’s Buy Rating matches amount Buy rating, with best scores for valuation and profitability, as well as averages Wall Street Buy ratings by analysts.

Seeking Alpha contributor Hong Chew Eu considers LEN stock a Should Hold, noting its cyclical nature to the broader housing construction sector, which has struggled to High mortgage rates crush demand.

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