Hovnanian May Get Its House In Order Fast

A Steeply Pitched Roof
Hovnanian Enterprises (HOV ), like other homebuilders, has suffered a big drop in orders. But it is one stock that a few contrarians and daring bargain hunters are betting on for a recovery sooner than the rest of the pack. Its stock has crashed from 54 in January to 25 in August and has since edged up to 28.35. The company posted a 34% drop in earnings for its latest quarter, but it did not cut its estimates of $5 to $5.75 a share for 2006. The consensus for 2007 is $3.18. Has the shattered stock already more than discounted the housing bust? "The upside potential significantly exceeds the downside risk," says Bernie Schaeffer, CEO of Schaeffer's Investment Research, which has bought shares. He sees the stock at 50 in a year. Ivan Feinseth of Matrix USA adds: "Hovnanian is priced like it's going out of business." Orders have only slowed but haven't stopped, says Feinseth, who rates the stock a "strong buy."

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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