Trade of the Day: PHM Stock is a Bargain Hunter’s Dream

Advertisement

PulteGroup, Inc. (NYSE:PHM) — In today’s Daily Market Outlook, I mentioned the housing sector as a place for traders to look for bargains. PulteGroup is the third-largest publicly traded homebuilder in the United States by market capitalization, revenues and number of homes delivered in 2014. The company caters to a variety of home buyers, with its customers including entry-level, move-up and active adults.

On March 19, S&P Capital IQ raised its opinion on PHM stock to “strong buy” from “hold” and increased its 12-month price target by $3 to $25. Its analysts estimate 2015 EPS of $1.37 and $1.52 in 2016.

Even though the housing market has been soft, Capital IQ said the company has done an excellent job improving and maintaining high gross and operating margins. Its analysts also highlighted the company’s increase in average home prices, large land inventory and low interest costs as positives. Furthermore, PulteGroup has $1.3 billion in cash that can be used to build or acquire communities.

Technically, PHM stock has stabilized with support at $20.50 following a pullback from a new high at $23.36. The midpoint of the stabilization is at the 50-day moving average at $21.78.

Shares are under accumulation and received a strong buy signal from the MACD and momentum indicators on Tuesday.

Despite a weak housing market, this homebuilder has maintained its bull market since bottoming in October 2011 under $4 per share. With upgrades from major research firms, it is reasonable to assume PHM stock will break from its current consolidation with a successful run against the February high.

My three-month target is $26, which is 19% above current prices; however, investors who take a long-term position in PHM stock could see a much larger return.

PHM Stock Chart
Click to Enlarge

Chart Key


Article printed from InvestorPlace Media, https://investorplace.com/2015/03/pultegroup-inc-phm-stock-trade-of-the-day/.

©2024 InvestorPlace Media, LLC