NVR (NVR) is faced with increased margin risk amid weaker housing demand in the homebuilder's key markets, BofA Securities said in a note Friday.
The company reported Q3 EPS of $89.45, below BofA's estimate, and orders fell 7% from a year earlier to 4,391, 14% below its forecast, according to the note.
The weaker absorption is concerning because NVR's sales pace had previously held up better than peers, the report said, adding that it will need to adjust price to drive sales pace.
"We expect incremental margin pressure on NVR," the note said.
BofA downgraded NVR to underperform from buy and cut its price target to $5,900 from $6,725, citing elevated valuation, weaker margin outlook, and slower trends in its core markets.
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