Toll Brothers (TOL) Stock Forecast & Price Target

Toll Brothers, a luxury homebuilder operating across over 60 markets in 24 states, has experienced increased foot and web traffic as it enters the typically slower fourth quarter of fiscal year 2025, indicating a positive sentiment among potential buyers. The company anticipates growth in fiscal year 2026 at the low end of the 7% to 10% range, despite slower demand in some markets, showcasing resilience in its business model. Additionally, the elevated conversion rate from deposits to orders at approximately 80% in the third quarter of fiscal year 2025, compared to a historical average of 60%, signals strong customer interest and effective sales strategies.

Toll Brothers has revised its delivery forecast down to 11,200 units, reflecting a cautious outlook and indicating potential weakness in demand despite an unchanged average home price range of $950,000 to $960,000. The company's adjusted home sales gross margin remains stable at 27.25%, yet the persistently high SG&A expenses at 9.4% to 9.5% of home sales revenues may indicate inefficiencies that could hinder profitability. Additionally, the overall market dynamics, characterized by flat lumber and material prices over recent years, along with Toll's focus on higher-end luxury homes, could limit its competitive edge compared to entry-level builders facing tighter supply challenges.