12 Best Consumer Discretionary Stocks to Buy According to Analysts

10. Meritage Homes Corp. (NYSE:MTH)

Upside Potential: 37%

Number of Hedge Fund Holders: 35

Meritage Homes Corp. (NYSE:MTH) is a designer and builder of single-family attached and detached homes. The company primarily operates in historically high-growth regions of the United States, offering a variety of entry-level and first move-up homes. Additionally, they run a financial services business that provides title and escrow, mortgage, and insurance services.

ClearBridge Investments, an investment management company, disclosed Meritage Homes Corp. (NYSE:MTH) as its largest new position during Q3 2024 in its “ClearBridge Small Cap Strategy” investor letter. They stated:

“Our largest new position during the quarter was Meritage Homes, in the consumer discretionary sector, which builds single family attached and detached homes in the western and southeastern U.S. While higher mortgage rates have weighed on homebuilders and the demand for housing, we continue to believe that there is a systematic shortage of housing in the U.S., and that a decline in interest rates and subsequent mortgage rates should prove a boon to homebuilders. Beyond broader sector tailwinds, we opted to move our capital from Century Communities to Meritage given the latter’s higher historical level of returns at a comparable current valuation.”

On January 31, 2025, Evercore ISI reiterated its Buy rating for Meritage Homes Corp. (NYSE:MTH). In early February, Keefe Bruyette analyst maintained a Market Perform rating but lowered the price target to $90 from $97, citing a challenging environment for homebuilding. Despite this, the price target still reflects a healthy 22% upside.

Meritage Homes Corp. (NYSE:MTH) reported steady results on January 29. Home closings (deliveries to homeowners) increased by 2% year-over-year to 4,044 units. However, home closing revenue declined by 3% due to slightly weaker average sales prices. Despite softer demand, the company managed to secure orders totaling 3,304 homes. Overall, the results were steady, and the company continues to benefit from favorable demographics, an undersupply of affordable homes, and job market stability. Meritage Homes’ geographic diversity and strong local market positions have supported its business model through various market cycles and should enable it to withstand medium-term volatility.