Investing.com – PulteGroup, Inc. (NYSE:PHM) and Toll Brothers, Inc. (NYSE:TOL) traded around 1% higher Monday after getting a double upgrade from Bank of America Securities (NYSE:BAC) due to favorable risk-reward profile.
The brokerage is now rating the homebuilders ‘buy’ from ‘underperform’ earlier.
BofA maintained its target for Pulte at $58, over 22% higher than the stock’s current price of $49. Toll Brothers is seen at $63, around 17% higher than its current level of $54. Analyst Rafe Jadrosich earlier had a target of $61 for the stock.
Pulte recently announced a $1 billion share buyback program.
According to Jadrosich, industry tailwinds and fundamentals remain strong, despite the recent increase in interest rates.
Pulte currently trades at discount on price-to-book relative to its return-on-equity compared to peers while Toll Brothers is at a slight premium, the analyst said, while adding that both should outperform compared to their peers.
Jadrosich pointed out that roughly 75% of Toll’s land was purchased pre-pandemic (~3 year supply) and should provide a long runway for healthy margins.