The broker cut its rating to ‘Hold’ from ‘Add’, with a shrinking order book another concern.
Bellway has 5,190 homes on order to the value of £1.31bn, which compares to £1.47bn a year ago.
Full-year results on Tuesday showed revenues rising 8.6% to £3.21bn but lower operating margins of 21% against 22%.
Analysts at Peel Hunt said the results were in line with expectations and reflected “negligible house price inflation being more than offset by ongoing build cost pressures”.
The mid and small-cap broker said it expects Bellway's margins to recede even further to 19.8% in 2020, leading to a 6% reduction in forecast profits to £640mln (£663mln).
Even so, the broker's price target rose to 3,550p from 2,945p to reflect the share price's 40% rise year-to-date.