Why Goldman Just Upgraded Homebuilder Toll Brothers

Photo: ProPublica

From Goldman’s Joshua Pollard, an upgrade of Toll Brothers to Buy:We upgrade Toll to Buy from Neutral as our confidence is growing in the high-end segment of the housing market. In our 2Q11 housing survey we found that consumers in the higher income bracket are more constructive on home prices (33% in the $120K or above income category expect home price appreciation vs. 21% for the broad survey) and have a higher desire to purchase a new home (38% vs. 20% for the broad survey). As a result we expect Toll’s order growth to continue to outpace the group; we see better pricing and margin trends, and lower risk of inventory impairments. Our $25 six-month target (up from $20) implies 20% upside.

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