Housebuilder Barratt Developments PLC (LSE:BDEV) faced up to the stark reality of falling demand in last week’s full-year results, prompting skewed reviews from analysts.
Citigroup analysts seemed content on Barratt’s bid to increase offerings for the private rental sector, suggesting the move could shield the FTSE 100-listed builder from falling prices in the wider market.
“While these are contracted at a discount to open-market and [are] arguably margin dilutive, it limits the need for higher discounts in the open-market sales,” Citi noted.
Deutsche Bank brokers were less positive about Barratt’s move to complete 750 homes for the sector though, arguing the deals will be difficult to obtain and reach prices on as other housebuilders follow suit.
Barratt faced a share price target downgrade from the German bank as a result, with the freshly tipped 392p marking a prospective 5% fall on Monday’s opening.
Reporting full-year results last week, Barratt said profits were in line with expectations, but anticipated a worse 2024 performance due to “significant macroeconomic headwinds”.
“We are responding to market conditions by driving revenue through the use of private rental sector sales and the focused use of incentives,” the firm reassured, adding strong cash reserves should also help.
Citigroup analysts were sold by the strategy shift, reiterating Barrat’s ‘buy’ rating and revising their share price target to 506p - a potential rise of almost 23%.
“This short-term sales strategy is directed to sell through its active outlets faster, thereby driving better margin recovery from new site openings as housing affordability improves,” the bank said.
Barratt shares were trading 0.7% lower on Monday at 409.4p.