Barclays analyst Matthew Bouley has reduced his price target on Champion Homes Inc. (NYSE: SKY) from $97 to $72, stating that the shares are now fairly valued after a strong performance.
Analyst Insights
- Bouley maintained an Equal Weight rating for the shares, highlighting a challenging demand environment that is expected to impact Champion’s near-term margins.
- He noted that visibility into when the company will return to its long-term gross margin framework of 26% to 27% is limited.
Contributing Factors
The analyst identified several factors affecting Champion Homes:
- Softer utilization rates
- Consumer preference shift towards smaller homes
- Increasing input costs
Company Growth
Despite these challenges, Champion has experienced significant growth:
- FY2025 sales are projected to reach $2.5 billion, a 23% increase from FY2024.
- FQ4 2025 revenue is expected to be $594 million, reflecting an 11% increase.
Champion sold 26,000 homes in FY2025, compared to approximately 22,000 units per year in previous years.
Strategic Expansion
The company is enhancing its retail capabilities through acquisitions, such as:
- Iseman Homebuilders
Additionally, Champion is focusing on growth in key markets, particularly Texas.
Conclusion
Bouley expressed concerns about the homebuilding business, stating, "We expect SKY’s homebuilding business to be impacted by lower margins in the near term due to softening demand." He added, "While we believe SKY can return to its long-term gross margin framework of around mid-20s%, visibility into this timeframe is limited."
Following these comments, shares were down approximately 0.7% in premarket trading on Wednesday.
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