DR Horton had a strong Q3 but price action today has been ‘dangerous’

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Written on Jul 20, 2023

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DR Horton reports a strong Q3 and raises full-year guidance.
Shares of the homebuilder are still in the red on Thursday.
Pro reacts to unusual price action on CNBC's "Halftime Report".

DR Horton Inc (NYSE: DHI) is in the red today even though it reported strong results for the fiscal third quarter.

The price action is all the more interesting considering the homebuilder also raised its guidance for the full year. On CNBC’s “Halftime Report”, Ritholtz’ Josh Brown said today:

I don’t like when stocks go parabolic and then reverse and close the day negative. That’s really dangerous price action. I think you’ve got to be careful until it cools off.

DR Horton now forecasts its revenue to come in between $34.7 billion and $35.1 billion this year on sales of 82,800 to 83,300 homes.

For the year, the homebuilder stock is still up nearly 40%.

What may be behind today’s price action

A possible explanation for the unusual price action may be that the stock opened at a record high this morning that may have triggered profit taking. According to Josh Brown:

Maybe the shareholder base is now too heavily concentrated amongst momentum players and not as heavily concentrated amongst fundamentally driven shareholders.

DR Horton reported a 37% annualised growth in net sales orders to 22,879 in the second quarter and a 26% increase in value to $8.7 billion, as per the press release.

Wall Street currently has a consensus “overweight” rating on the construction company.