Persimmon shares reflect built-in optimism

Persimmon will be kicking off a week of figures from UK housebuilders and should set the tone for a buoyant sector.

The company posted an update in November confirming that visits to its website were up by around 20% from the same time last year. It also stated that private sales had increased 45% year-on-year. These figures prompted analysts to upgrade their expectations and call for pre-tax profits to rise by 37%. That being said, in comparison to many of its competitors Persimmon is a touch overpriced.

Next week will see Barratt Developments and Balfour Beatty reporting on Tuesday. On Wednesday we will hear from Taylor Wimpey and on Thursday from Bovis Homes.

All of these companies have benefited from the government-backed homebuyer scheme, which has helped an increased number of first-time buyers to get a foothold on the housing ladder. Of course, it has not all been plain sailing, as back in November 2013 the Bank of England surprisingly scaled back its assistance to the mortgage-lending market.

Having seen the way Persimmon’s shares have performed in the last month, we are left questioning to what extent the anticipated good results have already been factored in. The 1300p level has proved to be a step too far in the past. Nevertheless, any conclusive break above this could trigger a raft of stops and end up being the catalyst for a move higher.

Persimmon plc chart

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.