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Bellway shares are tracking the housing boom, and the trading update in August pointed to a strong finish to the final year. The firm has been going from strength to strength because the housing market is racing away, and that is partially fuelled by the government's help-to-buy scheme, and willingness of banks to lend.
The latest update from Bellway stated the completions is on track for a record number. As the financial year for 2015 draws to a close, the prospects for 2016 are already looking good. Both the order book and the land bank rose considerably on the year.
One of the main concerns for Bellway is what will be the Bank of England’s next move, as many people are worried about a housing bubble. Given the slump in global commodities, inflation will not be an issue in the near-term and this will prevent Mark Carney from hiking interest rates any time soon, which will keep pushing Bellway shares higher.
When Bellway announces its annual results, dealers are anticipating revenue of £1.74 billion and net adjusted income of £268 million. These forecasts represent an 18% rise in revenue and a 40% jump in adjusted net income. The firm will also post its second-half numbers in the same report and traders are expecting revenue of £917 million, which compares with the first-half revenue of £831 million.
Investment banks are very bullish on Bellway, and out of the 17 ratings, 11 are buys, and six are holds. The average target price is £26.67, and that is 5.5% above the current price. Equity analysts are less bullish on Persimmon, and out of the 16 ratings, two are buys, 11 are holds, and three are sells. The average target price is £20.20, which is marginally below the current price.
The stock is trending higher with £26.20 as the initial target. A move through it will bring £27 into play, and a longer-term view would be £30.
Pullbacks in the stock will provide good buying opportunities, and should any downward moves will find support at £20.20.