KB Home stock lacks upside after recent rally: Wedbush
- Wedbush analyst downgraded KB Home to "neutral" on Monday.
- Jay McCanless says KBH is in an increasingly competitive environment.
- KB Home stock has already rallied about 30% over the past month.
KB Home (NYSE: KBH) has gained nearly 30% over the past month but a Wedbush analyst says it’s as far as the stock goes for now.
KB Home stock downgraded to neutral
Copy link to sectionOn Monday, Jay McCanless downgraded the homebuilder from “outperform” to “neutral. His $55 price target on the construction stock does not suggest a meaningful upside on its previous close.
The analyst turned dovish today as he does not “see an evolving catalyst” that could help unlock the next leg up in KB Home stock.
Note that McCanless changed his stance on the California-based company even though it did beat expectations for profit and revenue in its latest reported quarter.
A dividend yield of 1.50% also failed to make him maintain his bullish view on shares of KB Home on Monday.
KB Home is in a competitive environment
Copy link to sectionMcCanless is no longer comfortable in recommending KB Home stock due to an increasingly competitive environment where homebuilders are opting to aggressively cut prices to boost sales.
Such an environment, he told clients in a research note today, may mean more downside risk to the estimates.
We are taking this opportunity to lower our FY23 and FY24 gross margins to reflect a more competitive environment in C4Q23 versus what we expected in our 9/21/23 F3Q23 KBH writeup.
The Wedbush analyst now forecasts KB Home to earn $6.91 a share in its fiscal 2023 and $7.15 per share in its next financial year. He expects gross margin at 20.5% in the final quarter of the current financial year.
