KBW upgrades Toll, citing the K-shaped housing market favoring the ‘affluent’
An economy with disparate K-shaped benefits is leading to opposite outlooks for Lennar and Toll Brothers, according to Keefe, Bruyette & Woods. The bank downgraded Lennar to underperform from market perform, while upgrading Toll Brothers to outperform from the same previous rating. KBW has an $86 price target on Lennar, which represents a 5% loss from Monday’s close. Its $161 price target on Toll Brothers indicates a 17% gain from Monday’s close. Analyst Jade Rahmani said in a Monday note that entry-level homebuilders like Lennar are facing pressures as lower-income consumers continue to struggle with the high cost of housing and other goods and services. LEN YTD mountain Lennar year-to-date. “The current backdrop remains difficult: weak consumer confidence, uncertain job market, and high mortgage rates, which will force builders to maintain elevated incentives (sub-4% buydowns in certain markets) while inflationary pressures could limit margin relief,” Rhamani wrote. “In this environment, the recovery is bifurcating with affluent consumers outperforming low/middle-market cohorts… We estimate LEN’s entry-level mix is around 50%.” Compare that to Rahamani’s forecasts for Toll Brothers. He sees 6% to 8% order growth in his 2026 to 2027 model projections and thinks gross margins will likely be stable. “TOL’s affluent positioning… insulates it from entry-level softness, with a buyer base of high FICO scores, large downpayments, and meaningful cash-buyers, plus substantial lot premiums/option upgrades per home,” Rhamani wrote. In 2026, shares of Toll Brothers are up just under 1.5%, but Lennar’s stock is down almost 12%. Toll Brothers rose 1.7% in premarket trading while Lennar fell 0.3%. TOL YTD mountain Toll Brothers year-to-date.
