Story updated at 9:50 a.m. to reflect market activity.
D.R. Horton fell -0.5% to $21.69 in morning trading.
The analyst firm lowered its price target for the company to $24 from $27. D.R. Horton is sacrificing near-term margins according to MKM analysts Megan McGrath and Ross Sparenblek.
"We expect the shares could pop slightly from yesterday's strong decline, as we believe that the reaction was somewhat overdone," the analysts wrote. "However, we are concerned that upside will be limited due to: 1) DHI's apparent willingness to sacrifice near-term gross margin for longerterm returns, which could offset any order growth benefit; 2) additional earnings risk from impairments as DHI continues to focus on ROI; and 3) the loss of any valuation premium the company was earning as a "safer" homebuilding play given DHI's lack of guidance."
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Separately, TheStreet Ratings team rates D R HORTON INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate D R HORTON INC (DHI) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income, attractive valuation levels, increase in stock price during the past year and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."