Cavco Industries (CVCO) is positioned for improving demand and margin recovery as organic shipment declines moderate and recent demand improvements gain traction, Oppenheimer said in a Wednesday note.

The brokerage expects organic growth to turn positive in fiscal Q3, supporting higher average selling prices and factory-built margin recovery to 9.4% in fiscal 2028 from 8.9% on a trailing-12-month basis, driven by sustained demand and longer backlogs.

Cavco's backlog rose 50% sequentially in fiscal Q1, while industry shipments turned positive in June and July, with the brokerage expecting demand to remain supported by consumers seeking more affordable factory-built housing amid higher mortgage rates, according to the report.

The analyst expects the El Mirage expansion to add capacity in fiscal 2028 and potentially contribute about $12 million in operating income, while easing material cost inflation and higher shipments should support margins through pricing and SG&A leverage.

Oppenheimer initiated coverage with an outperform rating on the stock and a price target of $720.

Cavco Industries shares were up 1% in Wednesday trading.

Price: 561.48, Change: +5.36, Percent Change: +0.96