A 66% YTD Gain Puts IBD Stock Of The Day In This Bullish Base Pattern

Posted by jbrumley on August 10, 2023 5:52 PM

KB Home (KBH) is the IBD Stock Of The Day for Thursday. KBH stock is building toward a buy point and trading near a 16-year high.

Homebuilders have rallied aggressively this year, as rising interest rates have slowed sales of existing homes, driving demand and prices for newbuilt homes. The Building-Residential/Commercial industry group bolted nearly 42% so far in 2023.

KBH stock ranks fifth in the group, according to IBD Stock Checkup. Jacksonville, Fla.-based Dream Finders Homes (DFH) leads the group. Rivals D.R. Horton (DHI), Lennar (LEN) and Toll Brothers (TOL) have sailed nearly 40% higher for the year.

PulteGroup (PHM) has soared 83% so far in 2023 and Taylor Morrison Home (TMHC) has rallied 57%.

Data from the National Association of Realtors showed new home sales dropped in June, following a surge during the month of May. But prices remained strong and demand steady as high mortgage rates left owners of existing homes sitting tight — not wanting to sell and move up into more expensive mortgages.

July's new home sales data is due on Aug. 23.

Meanwhile, housing prices rose 0.4% month-over-month in both June and July, according to the Aug. 10 CPI report. The bump in home prices accounted for more than 90% of the overall CPI increase, the Bureau of Labor Statistics noted.

KB Home easily beat forecasts for its Q2 results from June 21. Earnings fell 16.4% to $1.94 per share, but were well above estimates for $1.33 per share. Revenue rose 3% to $1.77 billion. FactSet analysts expected $1.43 billion in revenue.

Its average selling price declined 3% to $479,500. But net orders rose 1%, marking a significant improvement to the 49% year-over-year dive in Q1.

For the year, KB Home raised its housing revenue forecast to $5.8 billion-$6.2 billion, from $5.2 billion-$5.9 billion. KB Home expects an average home selling price of $485,000.

KBH Stock Analysis

KBH stock is in an ascending base started in mid-May. Ascending bases are uncommon and generally form in stocks eager to move higher.

The base has a 55.37 buy point and has held support at KBH stock's 21-day exponential moving average. The stock broke below that technical line of support in weak trading on Thursday.

Year to date, shares soared nearly 70% and are trading near their highest levels since 2007.

KBH stock has a solid 95 Composite Rating out of a best-possible 99. The Composite Rating combines various technical indicators into one easy-to-read score. KBH stock has an 83 EPS Rating. Its relative strength line is shy of 52-week highs and has a 96 RS Rating.

From Investors.com