Fear always creates opportunity.
Look at Pulte Group (SYM: PHM), for example.
After dropping from about $137.50 to a recent low of $107.64, PHM has become excessively oversold. It’s also over-extended on RSI, MACD and Williams’ %R. Plus, the last time these three indicators were this over-extended, PHM rallied from a low of about $106 in October 2024 to a high of about $134.88 by December.
It’s also safe to say a substantial amount of fear has been priced into the homebuilder. Sure, there are concerns over a decline in the company’s sales gross margins, but that appears to have been priced into the $27 drop in the stock.
Helping, analysts at Wedbush just upgraded the PHM stock to an outperform rating with a $135 price target. The firm also says the pullback is overdone, noting that, ““In addition to Pulte’s favorable customer mix, consistent buyback, and pristine balance sheet, we also see a couple other catalysts for the name. Over the long term, we think 50% to 60% of Pulte’s buyer base may be less rate sensitive than some other companies’ sales mix,” as quoted by CNBC.
Plus, according to the firm, PHM’s balance sheet is “pristine” and expects for the company to be in a net cash position in the fiscal fourth quarter of 2024.
PHM isn’t the only excessively oversold homebuilder to keep an eye on. Here are two more.
KB Home (SYM: KBH)
Over the last few weeks, KBH plummeted from about $86 to a low of $64.64. It’s also oversold on RSI, MACD and Williams’ %R. It also appears that negativity has been fully priced in here, too, on missed earnings and fears about future demand and profitability in the housing market.
But again, that’s been priced into the latest pullback.
Lennar (SYM: LEN)
Lennar is just as oversold after dropping from about $180 to $134.37. It’s also oversold on RSI, MACD and Williams’ %R. Fear is also priced into the pullback following weak earnings and guidance. Also, while a good number of firms did lower price targets on the LEN stock, that’s been priced in, as well. Plus, at this point, the pullback in LEN is overkill.
Bonus Reading – Don’t Buy Another Stock Until You See This
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