• Toll Brothers got hammered by as much as 10% on Tuesday morning.
  • The homebuilder beat earnings estimates but lowered its forecast due to weak demand in November.
  • Based on its market cycles, we believe there is likely more downside risk.

The company reported earnings per share of $2.08 and total revenue of $2.46 billion, compared to analyst estimates of $1.83 and $2.35 billion. Next quarter, management expects to sell between 1350-1500 homes ranging between $850,000-880,000.

This guidance reflects weak housing demand, according to CEO Douglas Yearley, “In November, we saw the market soften further, which we attribute to the impact of rising interest rates and the effect on buyer sentiment of well-publicized reports of a housing slowdown.”

In analyzing the market cycles for TOL, we can see that the stock has been in decline for many months, recently bouncing into the resistance zones. Now it has resumed this decline. Our projection remains negative, with a likely drop below $29.

For more from Slim, or to learn about cycle analysis, check out the askSlim Market Week show every Friday on our YouTube channel.