Toll Brothers (TOL) Stock Forecast & Price Target

Toll Brothers is positioned to outperform because its luxury focus targets affluent buyers with higher incomes, accumulated wealth, and a meaningful cash component, making demand less rate-sensitive than entry-level housing. Its recent operating results support that view, with 2,662 homes delivered, $2.65 billion of home sales revenue, 25.6% adjusted gross margin, and 14.4% return on equity, while net contracts rose 5% to 2,508 and backlog quality remained strong. The company also benefits from a structurally undersupplied housing market, a strong land bank, $1.1 billion of cash, about $2.24 billion of available borrowing, and aggressive capital returns, including roughly $231 million returned to stockholders and a $700 million repurchase plan.

Toll Brothers is facing a weakening operating backdrop as affordability pressures from high mortgage rates and elevated living costs have slowed both existing and new home sales, while its FY3Q26 home sale revenue fell 8% year over year to $2.65 billion and deliveries dropped 10% to 2,662. Profitability is also under pressure, with gross margin at 23.9%, operating margin at 14%, and net margin at 11%, all down from prior-year levels as incentives and higher selling and administrative expenses rise. The negative outlook is further driven by recurring order misses in 9 of the past 11 quarters, a 7% expected decline in fiscal 2026 deliveries to 10,552, and downside risks from softer high-end demand, land cost inflation, and potential housing market deterioration.