Dream Finders Homes is Thursday's IBD 50 Growth Stocks To Watch pick, as it builds the right side of a cup base. Homebuilder stocks should benefit from lower mortgage rates after the Federal Reserve announced a half-point interest-rate cut Wednesday afternoon.
BofA Securities raised its price target on to 38 from 35 and held its neutral rating on the DFH stock Thursday.
Dream Finders Homes builds and sells single-family homes mostly in the Eastern U.S. and Colorado. Its average sales price was $514,833 as of the second quarter.
Dream Finders holds the No. 4 spot out of the 22 stocks in the residential building group, which ranks No. 41 out of the 197 IBD industry groups.
Homebuilder Stock Sets Up In Base
The stock is building the right side of a cup base with a 44.38 buy point, which was also its all-time high set back in late March. The stock is on track for its sixth straight day of gains and reclaimed its 200-day moving average last week as it continues to climb from the bottom of the base. Shares have gained 12% so far this month.
It holds an IBD Accumulation/Distribution Rating of B, indicating moderate institutional buying over the last 13 weeks.
Another Robust Quarter Expected
Dream Finders Homes reported higher-than-expected second-quarter earnings but sales below views on Aug. 1. The company has averaged 25% profit growth over the last three quarters. Forecasts show current-quarter earnings growth tapering to 13% then 4% with two declining quarters to follow, according to MarketSurge.
Sales growth accelerated to 12% in Q2 from 4% and 8% in the prior two quarters. Dream Finders Homes' closings increased 10% to 2,031 from 1,846 in the prior year's same quarter, while net new orders increased 3% to 1,712 from 1,655.
"Despite the continued home affordability and interest rate challenges, Dream Finders achieved another strong quarter driven by our continued focus on strategic growth and operational efficiencies," said Patrick Zalupski, chairman and CEO, in the earnings report.
Third-quarter revenue projections are for an increase of 19% then trailing off to 1% over the next three quarters. Full-year EPS estimates are for a 16% lift and 2% in 2025.
The homebuilder stock holds a 96 IBD Composite Rating and a 98 Earnings Per Share Rating, which is the second highest in the industry group.
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