On Tuesday, B.Riley adjusted its outlook on Global Net Lease (NYSE:GNL), reducing the price target to $11.00 from the previous $12.50, while still recommending a Buy rating for the stock. The firm's analysis indicated a slight decrease in the forecasted Adjusted Funds From Operations (AFFO) per share for fiscal year 2024, adjusting from $1.35 to $1.33. This adjustment includes a $0.01 shortfall from the first quarter of 2024.
The expected Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) was also revised, decreasing from $612.9 million to $605.5 million. B.Riley anticipates that approximately 70% of the planned asset sales will be finalized in the second half of 2024. These sales are part of the management's strategy to reduce the company's leverage, aiming to lower the net debt-to-EBITDA ratio from the current 8.4 times to a target range of 7.4 to 7.8 times by the end of 2024.
The analyst noted that as Global Net Lease's leverage diminishes, its valuation multiple is expected to align more closely with those of other net lease Real Estate Investment Trusts (REITs). Currently, the average leverage for the net lease REITs monitored by B.Riley stands at 5.5 times, with a trading multiple of 14.9 times the estimated 2024 Enterprise Value to EBITDA (EV/EBITDA). Global Net Lease's shares are trading at 11.5 times the estimated 2024 EBITDA.
The revised $11.00 price target is based on a multiple of 13.0 times the Last Twelve Months (LTM) EBITDA, which is a reduction from the previously used multiple of 13.5 times, projected for the second quarter of 2025.
The report also highlighted that Global Net Lease's dividend of $1.10 per share, representing a 14.6% yield, is expected to be covered by the projected Funds Available for Distribution (FAD) for the years 2024 and 2025. Despite the adjustments, B.Riley maintains its Buy rating on the stock.
InvestingPro Insights
As B.Riley revises its outlook on Global Net Lease, it's crucial to consider the latest real-time data from InvestingPro for a more comprehensive analysis. The company's market capitalization stands at $1.73 billion, reflecting the scale of the business in the current market. Despite concerns over profitability, with a negative P/E ratio of -4.79 and adjusted P/E for the last twelve months as of Q1 2024 at -9.36, Global Net Lease has shown a significant revenue growth of 66.67% over the same period. This growth is further exemplified by an impressive quarterly revenue increase of 118.43% in Q1 2024.
InvestingPro Tips indicate that analysts expect sales growth in the current year, which aligns with the revenue growth metrics. Additionally, Global Net Lease pays a substantial dividend to shareholders, boasting a dividend yield of 14.61%, despite a dividend growth decline of -31.25%. It's worth noting that the company has not been profitable over the last twelve months and is trading at a high EBIT valuation multiple. These insights may help investors understand the potential risks and rewards associated with Global Net Lease's stock.
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