🔺 What to do when markets are at an all-time high? Find smart bargains, like these.See Undervalued Stocks

Wells Fargo shuffles its REIT ratings

Published 08/26/2024, 07:33 AM
Updated 08/26/2024, 07:35 AM
© Reuters.  Wells Fargo shuffles its REIT ratings
AVB
-
EQR
-
MAA
-
ESS
-
CPT
-
AMH
-
INVH
-

Wells Fargo recently made adjustments to its ratings of various Real Estate Investment Trusts (REITs), reflecting its outlook on the multifamily and single-family rental sectors as the market heads into the fall and 2025.

Wells Fargo reshuffled its ratings within the multifamily (MF) sector, highlighting its preference for REITs poised for accelerating top-line growth in 2025.

Notably, Wells Fargo upgraded Camden Property Trust (NYSE:CPT) to Equal Weight and Mid-America Apartment (NYSE:MAA) to Overweight while downgrading Equity Residential (NYSE:EQR) to Equal Weight.

The analysts expressed a "balanced view" of the multifamily sector, noting that they expect below-average growth compared to the broader REIT sector.

Despite this, they acknowledge increasing transaction activity, which has provided better price discovery and revealed discounted cap rates for some multifamily REITs.

Wells Fargo also pointed to a more balanced outlook between coastal and sunbelt markets, with sunbelt REITs performing better than anticipated so far in 2024.

"We expect AVB, ESS, MAA & UDR to show the best acceleration in SS revenue growth in '25 vs. roughly flat revenue growth for CPT & EQR," added Wells Fargo. "AVB remains our most preferred name within Residential long term & we expect it to deliver the best '25 SS revenue growth."

In the single-family rental (SFR) sector, Wells Fargo upgraded American Homes 4 Rent (NYSE:AMH) to Overweight, citing better expected 2025 top-line revenue growth and geographic diversification, particularly in the Midwest.

Conversely, Invitation Homes Inc . (NYSE:INVH) was downgraded to Equal Weight due to concerns over pricing power in key markets like Phoenix, Tampa, and Orlando.

The analysts described AMH as offering "defensive growth," forecasting a healthier SS revenue growth of 4.8% and cash flow from operations (CFFO) growth of 5.6% in 2025.

Wells Fargo views AMH's higher earn-in potential and better-blended rent growth as key drivers for its positive outlook. While AMH is considered more expensive than INVH on certain valuation metrics, Wells Fargo believes this premium is justified due to AMH's stronger fundamentals and stability heading into 2025.

The firm sees the most upside for UDR, Inc. (UDR) in the multifamily space and views AMH as the top pick in the SFR sector.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.