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Lennar shares rose more than 2% in morning trading.

The market is undervaluingLennar’s internal improvements and potential in a hot housing market, according to JPMorgan.

The homebuilder reported its second-quarter earnings on Wednesday, delivering revenue and earnings per share that beat FactSet estimates. The company also raised its guidance for average sales prices and gross margins.

Additionally, the companyannounced in Marchthat it planned to spin off some of its non-core assets to create a rental housing venture.

JPMorgan analyst Michael Rehaut upgraded the stock to overweight from neutral, saying Friday in a note to clients that the company appeared undervalued based on its strategic shift and potential for share buybacks.

“At current levels, not only do we view LEN’s valuation as effectively not assigning much value to its proposed spin-off, but moreover, we expect the company to demonstrate further progress in its shift to an asset light model as well as, lastly, anticipate an increased level of returning cash to shareholders over time,” the note said.

Home sales and starts have slowed in recent months as a short supply of houses on the market has hit at the same time as sky high lumber prices. However, JPMorgan said Lennar’s management still seemed positive about the strength of the housing market overall.

The firm hiked its price target on Lennar to $141 per share from $115, representing upside of 49%. The stock has already gained 24% year to date.