Deutsche Bank Initiates Coverage on KB Home (KBH) with a Hold; Good Management, But Exposure to Risky Markets
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Deutsche Bank initiates coverage on KB Home (NYSE: KBH) with a Hold rating. Price target $17.
Deutsche analyst says, "In many regards, management of KB Home has been ahead of the curve in responding to the downturn. The company was early to cut prices, downsize product, respond to foreclosures and burn through land. The company has a "lean and nimble" position for eventual recovery. Unfortunately, we expect more of a W shaped recovery, with KB feeling the effects due to high exposure to some risky markets and a first-time buyer focus. Overall, we think housing headwinds are a strong enough concern to initiate coverage with a Hold rating."
"Since much of deferred taxes are off-balance sheet, the higher price-tangible book ratios for KB can lead to some cognitive dissonance for investors. We continue to value the homebuilders based off of book value; for KB we make a small downward adjustment to account for excess deferred taxes. We apply a roughly 0.9x multiple to our fully impaired book value scenario of $18.55 to arrive at our price target."
To see more analyst ratings on KBH Click Here.
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