Lennar is Friday's IBD Stock Of The Day. The Miami, Fla.-based homebuilder made a bullish move from key support, offering an early entry as LEN stock builds the foundation of a new base.
Lennar stock joined SwingTrader on Friday.
Lennar and other homebuilders, including D.R. Horton and Meritage Homes performed well through the first months of the year on expectations the housing market would pick up steam. But the sector came under pressure in late May as mortgage rates climbed back toward 2022 highs.
New home sales improved for the fifth straight month in April, the Commerce Department reported on May 23, the most recent data available. The rise was modest, from a seasonally adjusted annual rate of 656,000 to 686,000. But it was in stark contrast to falling sales rates for existing homes, which owners are holding onto in order to stick with their low-interest rate mortgages.
However, some analysts see an opportunity for homebuilders.
Lennar Stock Price Target Upgraded
Barclays raised its price target on LEN stock to 135 from 120 on May 24 and maintained its overweight rating on the shares. Analyst Matthew Bouley said in a research note he believes investors are underappreciating the positive impacts that low home inventory will have on new construction, and the implications for builders and construction product makers. Overall housing is still under pressure, but new construction is improving and in a "much stronger place," Bouley wrote.
Lennar earnings decelerated over the past four quarters from a 59% jump in Q2 last year to a 21% decline in Q1. Revenue gains slowed from 30% growth in the second quarter last year to a 5% increase last quarter.
For its upcoming report on June 14, FactSet analysts expect Lennar earnings to plummet 48% to $2.30 per share while sales carve 14% lower to $7.18 billion. Homebuilders generally will show big profit declines, but investors are betting on a return to growth next year.
LEN Stock
LEN stock jumped 3.6% to 112 on Friday, rebounding back above the 50-day and 21-day moving averages. Shares are actionable above the 21-day average, currently around 110.28.
Notably, Lennar rallied on strong volume Friday, unlike Meritage, D.R. Horton and a number of other builders making strong price gains.
Lennar stock broke out of a cup-with-handle base on April 12 and rallied to a peak at 116.18 on May 9, just below its December 2021 peak. Shares pulled back, especially in late May, falling below the 50-day moving average. On Wednesday, shares dipped to 105.90, just undercutting the prior 106.23 buy point.
Treasury yields have fallen over the past week, suggesting some relief for mortgage rates.
Lennar has a 94 Composite Rating out of a best-possible 99. The Composite Rating combines various technical indicators into one easy-to-read score. LEN stock has a strong 88 EPS Rating. Lennar's relative strength line is off early May highs and it has a 93 RS Rating.
LEN stock has rallied 24% so far in 2023 and is trending toward its all-time high 117.54 from December 2021. DHI and MTH stock have shown even stronger gains.
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