RBC Capital cuts Taylor Wimpey price target, keeps 'outperform' rating
By Michele Maatouk
Date: Friday 17 Jan 2025
(Sharecast News) - RBC Capital Markets downgraded its target price on Taylor Wimpey to 155p from 175p after its latest trading statement.
On Thursday, the housebuilder backed its profit expectations for the full year but sounded a note of caution as it pointed to increased build costs in 2025.
It warned that while price negotiations for 2025 are ongoing, it expects increased build cost pressure as a result of the changed economic backdrop, as suppliers look to factor in the impacts of the recent Budget.
In a note written after the update on Thursday, RBC said: "We have been surprised by the significant change in tone of Taylor Wimpey's commentary since their last trading update in November 2024.
"In November their glass was very much half full, it was lean, agile and firing on all cylinders. Today, the glass looks half empty, Taylor Wimpey appears, like many of us, to have put on a bit of weight over Christmas and caught a January cold.
"Whereas other housebuilders this week have been firmly on the front foot, Taylor Wimpey seemed to have lost its November mojo and be more comfortable on its back foot."
RBC said the housebuilder was so downbeat "it couldn't see the bulls for the bears".
It noted that the company's outlook assumed no underlying house price inflation, no wage growth, no improvement in mortgage rates, no land sales, and no significant pick-up in housing transactions.
"The implication: costs up, prices (at best) flat, therefore margins will go down," it said.
"Despite its efforts to turn us against, we still see reasons to be cheerful. We believe that our 30%-below consensus dividend per share of 7p has very, very firm foundations and offers an attractive yield of more than 6%."
RBC said that if volumes do pick up, 100 more homes equates to 10bps more margin, and, in its view, "Taylor Wimpey has the strategic land bank best placed to benefit from planning reform".
RBC maintained its 'outperform' rating on the shares.
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