Morgan Stanley initiates D.R. Horton stock coverage with Equalweight rating

Morgan Stanley has started tracking PulteGroup Inc. (NYSE:PHM) with an Equalweight rating and a price target of $128.00 as of October 1, 2026. This target indicates around a 10% increase from the current share price of $116.06, though data shows the stock might be undervalued at present. Analyst Adam Kramer emphasized the company's size, diversified buyer exposure, the Del Webb franchise, high mortgage capture, and land strategy.

He believes Del Webb growth, a 3% to 5% expansion in community count, pricing discipline, increased lot options, and continuous capital returns will help boost earnings. PulteGroup's margin sustainability and return on invested capital remain crucial, as high incentives, completed speculative inventory, and rising land costs pose challenges.

The firm's return on invested capital is currently at 13%, while its price-to-earnings ratio of 11.88 is below the sector average of 13x. The firm believes the stock's value depends on PulteGroup's diverse portfolio and returns-oriented strategy, which might warrant a premium due to its long-term durability. Morgan Stanley calculates the stock value using fiscal 2027 earnings per share, with an implied price-to-book ratio of 1.6x.

The sector's reference is based on the coverage group's present next-twelve-month price-to-earnings ratio of 13x. PulteGroup is part of the 1,400+ US equities examined by Morgan Stanley's detailed Pro Research Reports. Recent news includes Wolfe Research raising PulteGroup to an Outperform rating with a price target of $129, citing expectations of improved margins and strong fundamentals in 2026.

StoneX initiated coverage with a buy rating and a $148 target, pointing to long-term sales growth and financial strength. Citizens maintained its Market Outperform rating with a $145 target, noting steady demand trends and management's comments on market seasonality. Meanwhile, the National Association of Homebuilders reported an August Housing Market Index of 35, slightly surpassing expectations.

However, the BTIG/HomeSphere Homebuilder Survey showed a decline in demand conditions for August, with only 19% of builders reporting higher year-over-year sales, the lowest level since November 2023. These contrasting signals suggest a complex outlook for the housing market as PulteGroup navigates these conditions.