Evercore Lifts Price Targets On Four Residential REITs
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Wall Street analyst reports carry great weight. When an analyst upgrades a stock or maintains a previous rating while increasing the price target, investors can likely expect the share price to rise.
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When reviewing real estate investment trusts (REITs), analysts will often review a particular subsector and then increase or decrease price targets on more than one stock within that group. This was evident on July 10, when an analyst at Evercore ISI Group raised price targets on several residential REITs while maintaining the previous ratings for each. Take a look:
Invitation Homes Inc.
Invitation Homes Inc. (NYSE:INVH) is a Dallas, TX-based residential REIT that purchases large numbers of higher-quality single-family homes and then leases or lease-purchases them to higher-income tenants.
Invitation Homes has nearly 80,000 homes for lease in desirable neighborhoods across the U.S. and is now the largest owner/landlord of single-family homes in the U.S. It focuses on communities with strong rental demand and where purchasing homes is difficult due to high prices and a lack of inventory. Its Q1 same-store occupancy rate was 97.6%.
In December 2023, Congressional Democrats introduced the "End Hedge Fund Control of American Homes Act of 2023." This bill would restrict hedge funds, REITs and other pooled funds from investing in future single-family homes. It would also mandate that such investors sell at least 10% of the total number of homes currently owned to families per year over 10 years. Thus, within 10 years, REITs would no longer own single-family homes. However, this bill was highly political, was never voted on and is now bogged down in the Committee on Finance.
On July 9, Evercore ISI Group analyst Steve Sakwa maintained Invitation Homes at In-Line, increasing the price target from $36 to $37. It recently traded just below $36.
Essex Property Trust Inc.
Essex Property Trust Inc. (NYSE:ESS) is a residential REIT that owns and operates 254 apartment communities, with over 62,000 units in eight markets across the West Coast states of California and Washington. Essex Property Trust is a member of the S&P 500 and a Dividend Aristocrat with 30 years of increasing dividends.
On April 30, Essex Property Trust reported first-quarter FFO of $3.83 per share, beating the consensus estimate of $3.75. However, its revised FFO guidance for full-year 2024 of $15.03-$15.43 missed the estimate of $15.52.
On July 9, Evercore analyst Steve Sakwa maintained Essex Property Trust at In-Line and raised the price target from $254 to $260. The same day, Stifel analyst Simon Yarmak maintained Essex with a Hold rating and raised the price target from $243.50 to $267.
In June, Scotiabank analyst Nicholas Yulico had a much more optimistic view of Essex Property Trust with a Sector Outperform rating and a $285 price target. Piper Sandler analyst Alexander Goldfarb went even further, reiterating an Overweight position on Essex and maintaining a $315 price target.
One caveat on Essex Property Trust is that President/CEO Angela Kleiman recently sold 3,780 shares of company stock with a total value of $1,051,860. While insider selling is usually less noteworthy than purchases, this was a significant-sized sale.
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AvalonBay Communities Inc.
AvalonBay Communities Inc. (NYSE:AVB) is a residential REIT that acquires, develops and manages multifamily communities. As of March 31, AvalonBay Communities owned approximately 90,673 apartments directly or indirectly in 299 communities across 12 states and the District of Columbia. Eighteen of those communities were still under development. As of May, AvalonBay's occupancy rate was 95.5%.
On April 25, AvalonBay posted its Q1 2024 operating results. Core FFO of $2.70 per share beat the consensus estimate of $2.65 and FFO of $2.57 in Q1 2023. Revenue of $677.245 million was below estimates of $705.75 million but topped revenue of $673.64 million in Q1 2023.
On July 9, Evercore's Steve Sakwa maintained AvalonBay at In-Line and lifted his price target forecast from $205 to $207. Only two months ago, analyst Sakwa downgraded AvalonBay Communities from Outperform to In-line and announced a $202 price target. So, analyst Sakwa is feeling better about AvalonBay at present.
However, one caveat is that AvalonBay's occupancy rate has declined a half-percent over the past few months from 96.0%. Any continuation of that trend would likely hurt the share price. It was somewhat overbought a few weeks ago but has since declined from $282 to $274.
American Homes four Rent class A
American Homes four Rent class A (NYSE:AMH) is a Calabasas, CA-based residential REIT that purchases, develops, renovates and leases single-family homes. American Homes four Rent was created in 2012, had its IPO in 2013, and in 12 years has built a portfolio of 58,615 single-family units across 21 states. Its largest concentration of homes is in the Southeastern U.S., where population growth has been explosive. As of May 2024, its same home average occupied days was 96.6%.
One remarkable achievement is that over the past five years, American Homes four Rent has increased its quarterly dividend by 420% from $0.05 to $0.26 per share, without cuts or suspensions. It's a REIT that allows young investors to own real estate without the expense and headaches of being a landlord.
On May 2, American Homes four Rent reported its Q1 2024 operating results. FFO of $0.43 matched the consensus estimate and beat its Q1 2023 FFO of $0.41 per share. Revenue of $423.555 million beat the estimate of $416.684 million and topped Q1 2023 revenue of $397.703 million.
On July 9, Evercore's Steve Sakwa maintained American Homes four Rent at In-Line and raised the price target from $38 to $39.
Investors should remember that analysts are not always correct in their forecasts and one should never make purchase or sale decisions based solely on analysts' ratings or price targets. Most analysts are accurate about 50% of the time. TipRanks gives Analyst Sakwa a 51.13% success rate, with an average return of -0.20%.
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