Toll Brothers Sees Strong New Home Orders; Shares Rise 5%

Shares of Toll Brothers jumped 5.1% on Monday after the luxury home builder reported strong new home orders through the midway of its ongoing fourth-quarter.

In its preliminary 4Q results, Toll Brothers (TOL) disclosed that from August 1 to September 15, it signed net contracts for 1,678 homes, representing a 110% increase to the 800 deals reported during the same period in fiscal 2019. The company said that average monthly per-community demand more than doubled to 3.6 contracts during the period from 1.7 in the previous year.

Toll Brothers’ CEO Douglas C. Yearley said, “We attribute the accelerated buyer demand to a number of factors, including historically low interest rates, a continued undersupply of homes, and a growing desire for a home that can be personalized for today’s evolving lifestyles. Our luxury build-to-order business model is ideally suited to meet these trends.” Yearley believes that the company is well “positioned for growth in FY 2021, assuming market fundamentals remain favorable.” (See TOL stock analysis on TipRanks).

On August 26, Truist Financial analyst Rohit Seth reiterated his Hold rating and price target of $45 (4.3% downside potential) saying that the company’s “Valuation [is] well below peers despite likely more pricing power than entry-level peers in the current macro environment.”

Currently, the Street is sidelined on the stock. The Hold analyst consensus is based on 4 Holds, 3 Buys, and 4 Sells. With shares up over 19% year-to-date, the average price target of $44 implies downside potential of about 6.4% to current levels.