Bank of America has cut its price target on Persimmon PLC (LSE:PSN), the FTSE 100 housebuilder, to 1,220p from 1,300p, citing rising construction costs that it expects to squeeze profitability in 2027.
The broker kept its buy rating on the stock.
Bank of America now forecasts a roughly 100 basis point decline in Persimmon's underlying operating margin to 13.2% in 2027, reversing an earlier expectation of a modest improvement, before margins resume growth in 2028.
A basis point is one hundredth of a percentage point.
The analysts trimmed their earnings estimates by an average of about 7% across 2026 to 2028, and lowered the price target by 6%.
Persimmon remains exposed to higher building costs and the risk of weaker consumer confidence, the broker said, though its products help cushion the impact.
The company's average selling price sits around 15% below other volume builders, and its land holdings are weighted towards northern England.
Despite the downgraded forecasts, Bank of America said Persimmon was still the only listed housebuilder to deliver growth across all key operating measures, including sales rate, order book and outlet numbers.
It expects return on equity, a measure of how efficiently a company generates profit from shareholders' funds, of about 8% in 2027 and 9% in 2028, the highest among UK peers.
The broker also pointed to Persimmon's relatively advanced progress on cladding and fire safety remediation, which it said should reduce uncertainty over future liabilities and free up cash sooner.
Persimmon shares fell 6.66 to 1,044.5p, though the move reflected the stock trading ex-dividend rather than the note.
