Shares in the housebuilder Berkeley Group plc (LON:BKY) came under pressure after it was downgraded by the London arm of an American broker.
Jefferies pegged back its recommendation to ‘hold’ from ‘buy’ after a 45% rise in the value of the company in the year so far.
“We are very supportive of the group's business model,” it said in a note to clients.
“There is, in our view, an acute shortage of housing in London, however, we believe the share price now reflects much of that supply.”
READ: Berkeley upgrades five-year profit guidance but points to Brexit-driven slowdown
At 9.20am, the shares were changing hands for £40.70, down 27p.
Jefferies reckons the stock is worth £42.14, up from £39.58 when it last updated its analysis of Berkeley.
The broker also upgraded its pre-tax profit forecasts for 2018 and 2019 by 10% and 13% respectively.
The change in recommendation apes an identical move in stance by Deutsche Bank at the end of last month, which also said the share price was up with events.
And given the most recent update, that caution would appear justified.
Results reprise
Last week Berkeley warned that it expects forward sales to continue to moderate after a decline in the first half, blaming Brexit uncertainty and higher taxes.
However, the market was buoyed after it upgraded its forecast for the five years to April 2021 and posted an increase in first-half profits and revenues.
The company said it expects the current financial year to be a peak for the group, reflecting worries over Brexit, economic growth and inflation.
A hike in stamp duty for second home purchases and buy-to-let properties in April along with restrictions on tax relief for landlords on mortgage interest repayments has also weighed on the housing market.
Forward sales at the end of the first half at October 31 stood at £2.45bn, down from £2.74bn at 30 April 2017.
Profits up 36%
Pre-tax profit rose 35.8% year-on-year to £533.3mln for the first half on revenue of £1.6bn, up 13.7%.
The company sold 2,117 new homes across London and the South East, compared to 2,076 last year, and average selling prices rose to £719,000 from £655,000.
Reservations were 20% higher than last year but 10% lower than 2015/16.
Berkeley ended the period with net cash of £632.8mln, up from £285.5mln at the end of April.