JMP Sees Colony Starwood Benefiting From Outperformance In Single-Family Homes

JMP Securities has rated Colony Starwood Homes (NYSE: SFR) at Outperform and increased its price target to $34 from $29. The brokerage also boosted the NAV estimation by $5.00 to $33.59 from $28.55. The move comes after its positive experience with the company at NAREIT.

In a research note to clients, JMP analysts Aaron Hecht, Peter Martin and Bharath Iyengar stated, "Our meeting with management and additional details on its revenue growth through May leads us to believe that SFR, and the single-family industry as a whole, will likely outperform this year. SFR's blended same-store rent growth is trending toward 6 percent currently, versus 3.9 percent in 1Q16."

Also, after considering the year-to-date shares repurchased, along with the recent securitization that priced below expectations, there is a strong likelihood of FY16 FFO guidance being boosted during the next earnings call. The three analysts believe the company will continue to gain from higher interest from institutional investors as the individual NAREIT meeting and the NAREIT single-family rental panel was aptly attended.

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The brokerage increased its current year and next year AFFOPS expectations to $1.64 and $1.91 from $1.63 and $1.89, respectively.

The analysts elaborated, "We are buyers of SFR as our price target offers 19 percent potential upside from current levels. Accelerating same-store rents grabbing attention of investors. During 1Q16, same store rental growth was 3.9 percent, which has accelerated to 4.9 percent and 5.6 percent in April and May, respectively. Further, in June and July, asking renewals are going out at 6.1 percent and 6.5 percent, respectively, with achieved rents coming in at 90 percent of asking during April and May."

At time of writing, Colony Starwood was up 1.82 percent at $29.02.