On Monday, RBC Capital Markets adjusted its stance on MJ Gleeson (GLE:LN), downgrading the stock from Outperform to Sector Perform, while setting a price target of £6.50. The downgrade comes despite the firm's recognition of Gleeson's strategic positioning in the affordable housing market, which aligns with current government objectives and market demands.
RBC Capital's analyst pointed out that Gleeson's focus on affordable homes caters to both the affordability-stretched market and first-time buyers without parental financial support. This strategy is in line with the Labour government's ambition to significantly increase the supply of social and affordable homes. Gleeson aims to expand its volume from 1,772 in FY2024 to a medium-term goal of 3,000 units.
The initial Outperform rating was based on Gleeson's relative valuation and its growth trajectory compared to its peers. Although the company's share price has seen positive movement recently, RBC Capital suggests that on a one-year outlook, Gleeson's growth is being surpassed by other companies within the sector.
The analyst's commentary highlights that while the company's share price has performed well, its relative growth credentials have begun to diminish. This change in performance has prompted the adjustment in the stock's rating. The new price target of £6.50 reflects RBC Capital's revised expectations for the stock's performance in the current market environment.
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