Investing.com — RBC Capital Markets upgraded (LON:BTRW) to “outperform” from “sector perform” on Wednesday, cutting its price target to 350p from 425p, as analysts said the stock’s selloff had gone too far despite significant estimate reductions across the UK housebuilding sector.
The shares were trading at 260.30p at the time of the note, implying 34% upside to the new target. RBC set a downside scenario of 200p and an upside scenario of 475p.
“The sell off has gone too far,” analysts said, adding that while “the model may be a little damaged,” the group “has not lost all of its muscle memory.”
At 256p, Barratt trades on a CY2026E price-to-book of 0.56x, a level not seen since the Global Financial Crisis.
RBC cut its volume estimates by 2.5% for the year to June 2026, 8% for FY2027 and 10% for FY2028. Profit before taxation was lowered 7% in FY2026 and 19% in both FY2027 and FY2028.
Revenue estimates fell 3.3% to £5.72 billion in FY2026 and 8.5% to £6 billion in FY2027. Adjusted EPS moves to 25.8p, 29.5p and 36.8p across the three years respectively.
RBC values Barratt on a price-to-book basis, applying a 0.75x P/TBV multiple to its 2026 and 2027 tangible net asset per share estimates and averaging the two outputs to reach the 350p target.
The discount reflects risks around the integration of Redrow, the execution of the synergy program and operating without a CFO.
The upgrade comes despite RBC forecasting earnings below market expectations. The brokerage estimates FY2026 adjusted EPS at 25.8 pence, compared with a Visible Alpha consensus of 27.6 pence, with the shortfall widening to 13.9% in FY2027 and 12.3% in FY2028
The group currently has 83,700 owned plots, 10,521 controlled plots and 148,005 strategic plots as of H1 2026.
Barratt operates from 32 divisions, giving a maximum estimated output of around 24,000 homes per year against FY2025 completions of 16,565.
On the balance sheet, net debt including land creditors moves from a net cash position of £770 million in FY2025 to net debt of £340 million in FY2026, rising to £524 million by FY2028.
The dividend per share is cut to 13.2p in FY2026 from 17.6p in FY2025, recovering to 14.6p in FY2027 and 18.0p in FY2028, implying a yield of 5.1% at current prices.
The upside scenario of 475p assumes 12% volume growth and 5% house price growth in 2026 on a 1x P/TBV multiple.
The downside case of 200p assumes completion volumes fall 20% in both 2026 and 2027, house prices drop 10% across those years, and applies a 0.45x P/TBV multiple.
RBC said longer-term investors may be able to see the current situation as a once in a cycle opportunity.