Real estate investment trust (REIT) Invitation Homes Inc. INVH gapped down in price to a new 52-week low after reporting third-quarter funds from operations (FFO).
The company said FFO came in at $0.42 per share, the same amount as the previous quarter and an increase of $0.36 per share from last year’s third quarter.
Evidently, Wall Street had been expecting more as the selling took the REIT down by almost 8% by the end of trading on Oct. 27. Invitation Homes holds a portfolio of more than 82,000 single-family homes and is part of an entire sector adjusting to Federal Reserve rate hikes, which have resulted in greater than 7% 30-year mortgage rates.
That rapid rise to such a high level is quickly changing the economics of financing, refinancing and borrowing in general to purchase properties and land. Concerns are deeply felt among real estate investment trusts, especially those involved with single-family homes.
The daily price chart for the REIT looks like this:
The stock peaked in April at $43.50 and fell to $31 following the Oct. 27 release of the third quarter’s funds from operations. That’s a 29% loss in about half a year’s time. That the price remains well below the down-trending 50-day and 200-day moving averages is not a bullish sign.
For a more long-term view, here’s the weekly chart for the REIT:
Invitation Homes began to drop in price in late December 2021 and has continued downward with occasional rallies that failed to rise to higher highs. The stock seems to have found buyers now that it’s fallen to the level of the 200-week moving average which remains in an uptrend. The 50-day moving average is now trending lower — not necessarily a good sign for the REIT.
The company is trading more or less in line with the Real Estate Select Sector SPDR Fund XLRE, a benchmark for the sector that has declined from its April highs at about the same rate.
Invitation Home’s market capitalization is now $19 billion. For comparison’s sake, the market cap of the largest REIT in the group, American Tower Corp. AMT, is $92.5 billion.
Analysts at Jefferies Group LLC, Goldman Sachs GS and Mizuho Bank Ltd. all have buy ratings on Invitation Homes with price targets in the $38 to $39 range. The REIT continues to pay a 2.62% dividend.
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