I pose the question because LEN is having their earnings in a couple of days and I am extremely bearish (Disclosure: I have puts on LEN), but the market seems to be the opposite since they're at an all-time high. It makes no sense to me.
Looking at FRED charts, housing inventory is trending up from it's abnormal low and home sales have plummeted. Yeah, new home sales have been more steady, but that's only because we're in a rare moment where the median used and new home prices near identical. Considering affordability is at an all time low, used prices will eventually lower to create a more normal gap and take some of that market share back. I should note that new inventory is also trending up. So, we have an INCREASE in SUPPLY and a DECREASE in DEMAND… It's hard to interpret this any other way.
Next, looking at the projected EPS, it shows that it will be less than 2022 for at least the next 3 years. Only in the high, best case, scenario does EPS finally get back to 2022 levels, though it still takes 3 years. Also looking at projections, it's likely that there will be a 16% DECREASE in annual net income from the 2022 figure, this despite the fact that revenue will be almost even.
In conclusion, it seems most projections realize that the company will not achieve 2022 numbers, which were likely due to unique conditions that won't all be replicated (the lower interest rate, high house sale prices, decrease in building costs, etc.), so why is it that the stock is at an ATH and above 40% of what it was at the peak of 2022? Why is everyone so bullish? Are they counting on inflation to raise wages (affordability)? Unemployment is still officially low and that's done little for affordability (and it can really only go up from here in this high interest environment). Are people really predicting rates will go back down to the unprecedented 2-3%?
Any insight is appreciated!
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