Wedbush upgrades Pulte to 'outperform' as it sees stock undervalued

Investing.com -- Wedbush upgraded PulteGroup Inc (NYSE: PHM) to "outperform" from "neutral" given an overdone stock price decline and strong catalysts for growth. Shares were up 2.1% at $110.

Pulte stock has dropped about 27% since hitting a record high of $149.47 on Oct. 18, even as the S&P 500 gained 2% during the same period. Wedbush expects lower mortgage rates and improved credit availability in 2025 to support the homebuilder's growth.

The firm raised its Q4 earnings estimate for Pulte to $3.29 per share, above the Refinitiv consensus of $3.28, on expectations of stronger home closings. It also increased FY25 and FY26 EPS forecasts to $14.58 and $16.29, respectively, citing mid-single-digit revenue growth off a higher base in FY24.

Wedbush highlighted Pulte’s robust capital return strategy, including over $1.5 billion in stock buybacks authorized in 2024, and its pristine balance sheet, which is expected to move into a net cash position by the end of FY24.

The brokerage set a price target of $135, based on a 2 times multiple of its FY25 tangible book value estimate of $68.28. Despite trading at a premium to peers, Wedbush views Pulte as undervalued given its financial strength and growth prospects.

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