Lennar Corp: LONG Swing Trade
Thesis: Bullish Short-term
Company Profile:
Lennar Corporation develops and sells single-family and multifamily homes, along with residential land. It also provides mortgage financing, title, insurance, and closing services, and originates securitized commercial loans. Its customer base includes first-time, move-up, active adult, and luxury homebuyers, with involvement in fund investment activities as well.
Technical Analysis:
1. Monthly uptrend that might be approaching exhaustion (bearish RSI divergence).
2. Daily double-bottom pattern with large buying volume.
Fundamentals:
1. Healthy business: Net Profit Margin (11.5%) and Return on Capital (10.9%).
2. Decent growth that might be slowing down: Revenue Growth YoY (9%) - Fwd (4%).
3. Decent EPS growth that might be slowing down: EPS Growth YoY (11.8%) - Fwd (0.8%).
4. Positive revenue and earnings surprises in the last two quarters.
Conclusion:
The stock has experienced strong growth over the past two years, but it seems that investors are now beginning to show concern about future prospects. This concern manifested in a price drop after the last earnings report, despite positive surprises on both revenue (3%) and EPS (16.7%). Fundamentally, it is still a good business but the current valuation might be too high.
Coupled with bearish RSI divergence on the monthly chart, the stock is not suitable for a long-term position at the current price level, but it could still be a decent candidate for a swing trade (several weeks). The technicals show that large buyers remain interested in this stock, although selling pressure may still be strong.
It is possible to enter now with stops below the double-bottom, but a safer approach would be to wait for a third test of the support (160-163). The second option also provides a much better risk-reward ratio (3:1) and stronger support level (155)
Disclaimer
I don't give trading or investing advice, just sharing my thoughts.
Company Profile:
Lennar Corporation develops and sells single-family and multifamily homes, along with residential land. It also provides mortgage financing, title, insurance, and closing services, and originates securitized commercial loans. Its customer base includes first-time, move-up, active adult, and luxury homebuyers, with involvement in fund investment activities as well.
Technical Analysis:
1. Monthly uptrend that might be approaching exhaustion (bearish RSI divergence).
2. Daily double-bottom pattern with large buying volume.
Fundamentals:
1. Healthy business: Net Profit Margin (11.5%) and Return on Capital (10.9%).
2. Decent growth that might be slowing down: Revenue Growth YoY (9%) - Fwd (4%).
3. Decent EPS growth that might be slowing down: EPS Growth YoY (11.8%) - Fwd (0.8%).
4. Positive revenue and earnings surprises in the last two quarters.
Conclusion:
The stock has experienced strong growth over the past two years, but it seems that investors are now beginning to show concern about future prospects. This concern manifested in a price drop after the last earnings report, despite positive surprises on both revenue (3%) and EPS (16.7%). Fundamentally, it is still a good business but the current valuation might be too high.
Coupled with bearish RSI divergence on the monthly chart, the stock is not suitable for a long-term position at the current price level, but it could still be a decent candidate for a swing trade (several weeks). The technicals show that large buyers remain interested in this stock, although selling pressure may still be strong.
It is possible to enter now with stops below the double-bottom, but a safer approach would be to wait for a third test of the support (160-163). The second option also provides a much better risk-reward ratio (3:1) and stronger support level (155)
Disclaimer
I don't give trading or investing advice, just sharing my thoughts.
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