RBC Capital Markets sees Toll Brothers poised for strong earnings as demand improves. The firm sees sentiment surrounding luxury homebuilder stocks as “too negative.” “Given TOL’s high-end, West Coast, and build-to-order exposure,” recent trends suggest the company has experienced similar improvements to its peers, analyst Mike Dahl said. Dahl upgraded the stock to outperform from sector perform. He also raised his price target to $77 from $55, an upside of more than 18% from Wednesday’s close. “We expect very easy order growth in 1Q24, while we also see TOL’s long-term land bank providing margin advantage,” Dahl wrote in a note on Thursday. “TOL’s demand continued in May Improved, above normal seasonal trends. Deposits and footfall remain encouraging despite a return to 7% in rates, although we note that higher rates may not yet be fully reflected in demand trends,” Dahl continued. He also noted that prices have risen. Toll Brothers reported second-quarter earnings after the close on Tuesday. In addition to beating analysts’ expectations, management said the demand growth that began in January continued through the start of the fiscal third quarter. To be sure, Dahl said he remains concerned about whether the company’s recent improvements are the case. However, analysts see Toll Brothers as a relative outperformer due to its higher-than-average peer margins and cheap valuation. Shares were up nearly 1% in premarket Thursday. The stock has soared more than 30% in 2023. —CNBC’s Michael Bloom contributed to this report.