Taylor Morrison Home Corporation

TMHC Details

Taylor Morrison Home Corporation (NYSE: TMHC) is engaged in residential homebuilding and development of lifestyle communities primarily in Arizona, California, Colorado, Florida, Georgia, Nevada, North and South Carolina, Oregon, Texas, and Washington. Its homebuilding segments operate under the brand names of Taylor Morrison, Darling Homes, and William Lyon. It also offers financial services, title services, and homeowner's insurance policies through its wholly owned subsidiaries. As of September 1, 2021, its market capitalization stood at USD 3.52 billion.

CFO Retirement: On June 21, 2021, TMHC announced that Mr. Dave Cone, Executive Vice President and Chief Financial Officer (CFO), expressed his intention to resign from the company. Accordingly, Mr. Cone will retire later this year, subject to the appointment of his successor.

Q2FY21 Results: The company reported YoY growth of 12.62% in total revenues to USD 1.72 billion in Q2FY21 (ended June 30, 2021) compared to USD 1.53 billion in Q2FY20. Net income for Q2FY21 increased to USD 124.15 million from USD 65.67 million in Q2FY20. As of June 30, 2021, the company had cash & cash equivalents of USD 366.27 million and total debt of USD 3.08 billion.

Key Risks: The majority of TMHC's operations are concentrated on the west coast, with a significant presence in California. As a result, a slowdown or disruption of business activity in any of these areas can adversely impact the company's financial position.

Outlook: In Q3FY21, TMHC anticipates its average active community count in the range of 330 – 335. It also forecasts its home closings to the tune of 3,300 – 3,500, along with a GAAP gross margin (for home closings) of ~20%. For FY21, the average active community count is estimated to range between ~330 – 335, with home closings ranging between 14,500 and 15,000. GAAP home closings gross margin is expected to be 19% – 20%. TMHC also expects to incur land and development expenses of ~USD 2.0 billion.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

TMHC Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: TMHC's share price has increased 5.58% in the past month and is currently leaning towards the higher-band of the 52-week range of USD 21.34 to USD 33.06. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is 60.08. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 31.51. Considering the slight uptick in the stock price, a surge in profitability, current valuation, and associated risks, we recommend a "Hold" rating on the stock at the closing price of USD 28.56, up 1.67% as of September 1, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV. 

Purple Innovation, Inc.

PRPL Details

Purple Innovation, Inc. (NASDAQ: PRPL) is a comfort innovation company engaged in the design and manufacture of a variety of comfort products, including mattresses, pillows, cushions, frames, sheets, and others, leveraging its Hyper-Elastic Polymer technology. The company sells its products through two channels 1) Direct-to-Consumer (DTC), which includes sales through its showrooms and contact centers, and 2) Wholesale, which includes sales through third-party retailers, including both in-store and online channels.

Management Change: On August 24, 2021, PRPL's current Chief Financial Officer (CFO), Mr. Craig Philips, resigned from his position effective August 31, 2021. While a hunt for his replacement is currently underway, PRPL has appointed Mr. Bennett Nussbaum as the interim CFO. Mr. Nussbaum carries an experience of more than 45 years and previously held the position of CFO at Pepsi-Cola International, Burger King, and FedEx   Office.

Accelerating Capacity Expansion: On August 4, 2021, PRPL inaugurated its new McDonough manufacturing facility in Henry County, Georgia, providing 400 jobs. PRPL's ribbon-cutting ceremony follows its recent joint announcement with the State of Georgia that it will expand operations in Georgia and generate more than 500 new jobs over the next two years.

Q2FY21 Results: The company reported YoY growth of 10.59% in total revenues to USD 182.59 million in Q2FY21 (ended June 30, 2021) compared to USD 165.10 million in Q2FY20. The DTC channel, which accounted for 63.65% of the total revenue in Q2FY21, reported a YoY decline of 19.95%, whereas the Wholesale partner channel expanded 233.23% YoY. PRPL reported a net income of USD 2.58 million in Q2FY21 vs. a net loss of USD 93.28 million in Q2FY20. As of June 30, 2021, the company had cash & cash equivalents of USD 110.08 million and total debt of USD 42.41 million.

Key Risks: In FY20, PRPL's one individual customer accounted for ~15% and ~79% of its net revenue and account receivables, respectively. As a result, the loss of such key customers could hurt its financials. In addition, PRPL operates in a highly competitive comfort industry and faces direct competition from more significant players with higher financial and operational resources at their disposal. Hence, any competitors' price competition or superior product development could affect its market share and impair its financial performance.

Outlook: In FY21, PRPL expects to generate total revenue in the range of USD 820 – 850 million, thus realizing YoY growth of 26% – 31%, along with an adjusted EBITDA to the tune of USD 78 – 88 million.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Data Source: REFINITIV)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

PRPL Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: PRPL's stock price decreased 30.48% in the past six months and is currently trading in the lower band of its 52-week range of USD 17.01 to USD 41.08. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 46.11. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 29.65. Considering the correction in the stock price, decent balance sheet, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 25.13, up 2.99% as of September 1, 2021, 2:25 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.