JPMorgan downgrades Persimmon, reiterates cautious stance on housebuilders

The bank said it was reiterating the stance in spite of the sector’s recent underperformance on inflation data and the Bank of England response, as valuations are still above October 2022 levels and it sees incremental downside risks to estimates.

"Potential softening in sales rates from here, given the uncertainty on rates, puts the ‘24E volume recovery in jeopardy while scope for affordability-led ASP declines still remain," it said.

JPM downgraded Persimmon to ‘neutral’ from ‘overweight’ and cut the price target to 1,090p from 1,600p, as said its previously expected volume recovery in 2024 could now prove vulnerable. JPM said its price target implies only 6% upside potential.

"Furthermore, with one of the largest downside to 24E consensus, we place Taylor Wimpey and Vistry Group on Negative Catalyst Watch into H1 updates," it said. Vistry is rated ‘underweight’ and Taylor Wimpey ’neutral’.

JPM said overweight-rated Berkeley Group remains its preferred quality name in the sector.