Jim Cramer on Microsoft and Other Stocks

1. D.R. Horton, Inc. (NYSE:DHI)

Cramer mentioned that homebuilders like D.R. Horton, Inc. (NYSE:DHI) got hit on Tuesday due to higher interest rates.

“Lots of home builders, for instance, got clocked as they should with higher rates. D.R. Horton, which caters to the less wealthy, saw its stock fall $5 or 3%.”

D.R. Horton (NYSE:DHI) is one of the largest homebuilders in the United States, with a history of closing over 1.1 million homes across 125 markets in 36 states. Recently, however, it reported disappointing results for its fiscal fourth quarter, revealing that affordability challenges are beginning to hinder potential buyers. According to Bloomberg, some buyers seem to be holding off on purchases in anticipation of lower interest rates in the coming year.

According to CEO Paul Romanowski, while some homebuyers are waiting for financing costs to drop below a certain threshold, the company believes that “stability in rates” would be the most effective factor in driving demand. Romanowski emphasized that predictability in mortgage rates would help buyers make more confident decisions and create a more favorable market environment for the company.

According to TipRanks, on November 7, Raymond James downgraded D.R. Horton (NYSE:DHI) to Market Perform from Outperform with no price target. The firm cited a “higher for longer” outlook on mortgage rates and housing affordability. This shift reflects the market’s broader concerns in the wake of recent election results, which have contributed to a cautious view of the housing market.

The downgrade also led the firm to lower its EPS estimates for the company, particularly in light of the pressures on entry-level homebuilders. The analyst pointed out that first-time homebuyers, a key demographic for the company, are likely to face even greater affordability hurdles as they head into the spring market.

While we acknowledge the potential of D.R. Horton, Inc. (NYSE:DHI) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DHI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.

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