Financial Trading Blog

Stock of the day 18/08/2016 – Persimmon PLC



Can housebuilder Persimmon continue its post-Brexit result recovery following its half year update next Tuesday?


Despite suffering the same fate as the rest of the housing sector after the UK’s EU referendum, 2016 still hasn’t been too unkind to Persimmon. By the start of March it was trading at all-time highs of £22.55, and while it fell away from those levels between then and the end of June it was bouncing between £18.50 and £21.50, roughly the same bracket as it was in during the second half of 2015. Of course the Brexit vote did change all that, Persimmon plunging 40% across 2 sessions, at one point hitting a 2 and a half year nadir of £11.70. Since then, however, the stock has seen a relatively impressive recovery, climbing back to a current trading price of £17.80 (IT-Finance.com, 18/08/2016).

Persimmon PLC Chart August 2016 Spreadex Financial Spread Betting
(Source: IT-Finance.com 18/08/2016)

Persimmon has been backing up its market performance with a series of strong updates in 2016. Back in February it sent itself to that aforementioned all-time peak with its full year figures, the company reporting a 34% surge in pre-tax profit to £637.5 million off the back of a 13% rise in revenue to £2.9 billion. And though its first quarter update was received poorly in April, thanks to the perception of slowing sales, revenue still jumped 8% to £2.15 billion, with the average selling price increasing by nearly 6% to £220,000.

It’s most important statement came at the start of July, with Persimmon addressing the Brexit fears that had plagued its stock in the aftermath of the referendum. The company argued that it was ‘too soon to judge’ the impact of the Brexit on the housing sector, instead choosing to highlight its 12% rise in completed house sales for the 6 months ending June 30th.

Though it is still barely 2 months since the referendum investors will be expecting a fuller comment on the Brexit when Persimmon announces its half year figures next Tuesday, especially since it has already been revealed that, for the sector as a whole, housing prices rose at their slowest rate for 3 years across July.

Persimmon PLC has a consensus rating of ‘Hold’ with an average target price of £17.88.

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