UBS has advised investors to begin building a position in Builders FirstSource, as analyst John Lovallo initiated coverage of the stock with a buy rating. His price target of $232 suggests a potential upside of over 27% from the previous Thursday’s closing price. Lovallo aligns with 11 other Wall Street analysts who have a strong buy or buy rating for the stock, according to LSEG. Among the total of 16 analysts, the remaining four have taken a neutral position.
Lovallo views the housing market in the U.S. as “structurally underbuilt,” positioning Builders FirstSource for potential growth, with current challenges expected to ease by 2025. He expressed that the market seems overly cautious regarding the company’s growth prospects over the next few years, considering the ongoing multi-family market downturn, reducing building materials per housing start, and doubts about the trajectory of the residential construction cycle.
Lovallo anticipates that Builders FirstSource will achieve core organic sales growth at a compound annual growth rate of at least 7% through 2027. Additionally, he projects adjusted earnings to grow approximately 16% annually, alongside mid-to-high single-digit organic revenue growth. Lovallo emphasized the company’s potential to achieve above-market organic growth, leveraging its size and scale advantage, as well as unique growth initiatives like the rollout of a digital platform.
Following Lovallo’s report, the stock saw an approximately 1% increase in premarket trading on Friday, adding to its nearly 9% gains in 2024.
