On Tuesday, CFRA, a prominent financial research firm, revised its share price target for Persimmon Plc. (LON:PSN:LN) (OTC: PSMMY), a leading UK housebuilder, from £16.00 to £14.00, while maintaining a Hold rating. The adjustment reflects a new 12-month target price set by CFRA, which now implies a 2024 price-to-earnings (P/E) ratio of 16.7 times. This figure is comparable to the industry's forward P/E ratio of 16.9 times.
The revised target price comes after Persimmon's 2023 performance, which demonstrated the company's resilience in a tough market environment. The firm surpassed its new home completion guidance with 9,922 homes completed, against the expected 9,500. The fourth quarter of 2023, in particular, showed a strong sequential improvement, with 4,234 homes completed compared to 4,249 in the first half of the year.
Despite the positive outcome in completed homes, CFRA has adjusted its earnings per share (EPS) forecast for Persimmon in 2024 to £0.84, down from the previous estimate of £0.97, and has set the 2025 EPS forecast at £1.03. The company's private forward sales as of March 10, 2024, were reported to be stable at £946 million, showing a slight increase from £908 million on March 12, 2023.
However, Persimmon's conservative completion guidance for 2024, which anticipates between 10,000 to 10,500 homes, falls short of CFRA's initial projections. This cautious outlook suggests persisting uncertainty within the UK housing market. CFRA's maintained Hold rating indicates a watchful approach as analysts look for signs of improvement in the housing market, such as a higher land replacement rate, before changing their position on the stock.
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