JPMorgan Upgrades Lennar For 'Signficant and Ongoing Transformation'

Lennar Corporation’s (NYSE: LEN) stock valuation is attractive relative to peers and does not reflect the company’s “significant and ongoing” transformation, according to JPMorgan.

The Lennar Analyst: Michael Rehaut upgraded the rating for Lennar from Neutral to Overweight, while raising the price target from $115 to $141.

The Lennar Thesis: The valuation does not reflect Lennar’s proposed spin-off or additional progress in the company’s expected shift to an asset-light model, Rehaut said in the upgrade note.

“Importantly, we highlight that the company reached its target of its land position being 50% optioned two quarters early, while it further noted that it does not view this number as an end goal,” the analyst wrote.

“Moreover, we expect LEN to return more cash to shareholders over time, given the company’s strong cash flow generation and still fairly unlevered balance sheet,” he further stated.

“Regarding its FY21 guidance, LEN solidly increased its ASP outlook by 5% and its gross margins to 26.5-27.0% from 25.0%, while reiterating its closings outlook, which we view as positively addressing investor concerns regarding the current constrained supply chain backdrop,” Rehaut said.

LEN Price Action: Shares of Lennar had risen by 3.64% to $98.05 at the time of publication Friday.