REIT stocks have experienced significant volatility in recent months due to elevated interest rates and challenges in both the residential and commercial real estate markets. According to Fahad Saleem of Yahoo Finance, the S&P Global REIT has declined by 3.9% this year, and the Real Estate Select Sector SPDR Fund (NYSE: XLRE) has lost approximately 5% of its value. Morgan Stanley’s Ron Kamdem noted in a CNBC interview that minor interest rate cuts this year may not be enough to stimulate growth in the sector. However, he remains optimistic about the potential for technology and demand growth to renew investor interest in REITs.
Investors are now exploring opportunities beyond traditional REIT segments like office and retail, focusing instead on data centers, senior housing, and cold storage. CenterSquare, a real estate investment management company, reports that office REITs constitute just 4% of the industry, while alternative sectors make up 61%.
Despite the overall volatility, several REIT stocks have caught the attention of Wall Street analysts. Here are five REIT stocks recently upgraded by notable analysts:
Independence Realty Trust (NYSE: IRT)
Philadelphia-based Independence Realty Trust Inc. focuses on multifamily apartment properties and has received upgrades from Wall Street. Hedgeye recently began covering the stock, projecting it could reach the "low-to-mid" $20/share range. Hedgeye analyst Rob Simone described the stock as "underrated" and a "must-own" for the long term. As of July 8, Independence Realty Trust offered a 3.4% dividend yield and reported a 95% occupancy rate in the first quarter, with a 2.4% year-over-year increase in net operating income. The stock has gained about 20% this year.
Americold Realty Trust (NYSE: COLD)
Atlanta-based Americold Realty Trust Inc., which provides cold storage facilities and temperature-controlled supply chain solutions, was upgraded by Wolfe Research to Outperform. Wolfe Research cited anticipated growth from volume recoveries and development stabilization as key factors for the upgrade. JPMorgan analyst Michael Mueller also upgraded the stock to Overweight, predicting a strong earnings trajectory for 2024 and 2025. Despite a 14% decline in share value this year, Americold Realty Trust has a dividend yield of about 3.39% as of July 8.
Equity Residential (NYSE: EQR)
Illinois-based Equity Residential, focusing on apartment properties, received upgrades from Piper Sandler analysts in late June. The analysts raised the stock to Overweight from Neutral and increased its price target to $80 from $70, expecting strong trends in the second quarter. Equity Residential has a 3.97% dividend yield as of July 8 and anticipates revenue growth between 2% and 3% for 2024, driven by strong demand and pricing power in East Coast markets. The stock has shown promising performance with net operating income growth expected between 1% and 2.6%.
Digital Realty Trust (NYSE: DLR)
Digital Realty Trust Inc., a data center REIT, has benefited from rising demand for data centers driven by the AI revolution. JPMorgan upgraded the stock to Overweight and increased its price target to $175 from $150, recognizing the company's potential as a beneficiary of cloud and AI demand. BMO Capital Markets analyst Ari Klein also upgraded the stock to Outperform, forecasting significant FFO growth due to improved pricing and strong demand. BMO expects Digital Realty’s core FFO per share to rise by 1.5% in 2024, 6% in 2025, and 8% in 2026.
Acadia Realty Trust (NYSE: AKR)
New York-based Acadia Realty Trust, which focuses on retail properties in densely populated areas, was upgraded by JPMorgan analyst Michael Mueller to Neutral from Underweight. Mueller cited potential growth from rising occupancy and strong pricing power. In the first quarter, Acadia's FFO was $0.33, exceeding estimates by $0.03, and revenue increased by 11.6% year over year to $91.36 million. The company aims to achieve full occupancy by 2025 or 2026 and has secured base interest rates on floating-rate debt to mitigate interest rate volatility until at least 2027. Acadia Realty has a dividend yield of about 3.9% as of July 8.
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