Toll Brothers' (TOL) positive margin commentary could offset Q2 orders miss, but the stock's multiple is based on the view that the high-end housing market is holding up better than the low-end, Truist Securities said in a note Monday.
The order volume will be heavily monitored, and shares could experience near-term weakness if orders miss Street expectations, the brokerage said.
Despite the rate-driven sell-off in the group since the end of February, Toll Brothers remains the only stock in Truist's coverage that is not trading below its five-year average price-to-book ratio, according to the note.
Truist sees Toll Brothers continuing to gain share in the high-end housing market long term, but said current market conditions do not support the flat underlying demand needed to sustain its absorption rates year-over-year.
The brokerage added that it does not expect Q2 community count to reach the guidance and Street consensus of 455 active communities.
The company is set to report Q2 results on Tuesday.
Truist kept a buy rating on Toll Brothers with a price target of $170.
Price: $126.68, Change: $+0.45, Percent Change: +0.36%