In a turnaround from 2022, analysts have again begun to show improved regard for real estate investment trusts (REITs). While downgrades and lowered price targets dominated REIT news last year, more analysts have been upgrading them since the beginning of 2023.
Analysts have also been increasing their price targets on REITs in subsectors across the board. Even when analysts maintain rather than upgrade the stocks, they are still raising price estimates.
Take a look at three REITs that are benefitting from recent price target hikes:
SL Green Realty Corp. SLG is an office REIT — and the largest office landlord in New York City. It owns, leases and manages 61 buildings totaling 33.1 million square feet.
SL Green lost half its value in 2022 and has been unloved by analysts for many months, with four consecutive misses on revenue estimates from the third quarter of 2021 to second quarter of 2022. Fears of office vacancies from increasing work-from-home preference among many workers since the COVID-19 pandemic also pushed prices lower. Less than a month ago Mizuho analyst Vikram Malhotra lowered the price target for SL Green from $48 to $38 while maintaining a Neutral rating.
But on Jan. 30, Robert W. Baird analyst David Rogers maintained his Neutral rating on SL Green while raising his price target from $38 to $43, a significant 13% increase.
That price hike caught Wall Street’s attention, and SL Green stormed up 4.73% the following day. Part of that may have been a short squeeze as SL Green has a short interest level of 11.67%.
SL Green Realty also recently announced fourth-quarter funds from operations (FFO) of $1.47, a penny below estimates, and revenue of $224.87 million, which beat estimates by $30.13 million. SL Green Realty also said it had signed leases for 343,186 square feet during the first few weeks of 2023.
With these positives, SL Green had an amazing total return of 21.43% in January.
Prologis Inc. PLD is a San Francisco-based industrial REIT that owns and manages nearly 5,500 industrial logistics properties across the U.S. and in 18 other countries. Founded in 1983, Prologis has been a stalwart in appreciation among REIT stocks. It has the largest market capitalization of any REIT at $119.336 billion.
On Jan. 18, Prologis reported fourth-quarter 2022 operating results. Net earnings per diluted share for 2022 was $4.25, compared with $3.94 for the fourth quarter of 2021. However, net earnings per share of $0.63 was a large drop-off from $1.67 in the fourth quarter of 2021.
Core funds from operations (Core FFO) were $1.24, compared with $1.12 for the fourth quarter of 2021. Core FFO for all of 2022 was $5.16, well above $4.15 for 2021. Average occupancy was 98.2%, with a retention rate of 82% and full-year rent growth of 28%.
Since Jan. 23, Prologis has received significant analyst attention.
Morgan Stanley increased the price target on Prologis from $121 to $128. Truist Securities hiked its price target from $135 to $140. BMO Capital Markets lifted its price target from $140 to $145, and Raymond James improved its price target from $130 to $145. Only Barclays dropped its price target on Prologis, and that was from $162 to $160, well above these other estimates.
Prologis also had a prolific January, with a total gain of 14.72%.
National Retail Properties Inc. NNN is a net-lease REIT that owns a diversified group of stand-alone retail outlets across the U.S. National Retail Properties has a stable tenant base, with names like 7-Eleven Inc., Sunoco LP, Best Buy Co. Inc., Camping World Holdings Inc., BJ’s Wholesale Club Holdings Inc. and Chuck E. Cheese.
On Jan. 27, Oppenheimer & Co. Inc. analyst Tyler Batory raised his price target on National Retail Properties from $49 to $54, while maintaining an Outperform rating on the stock.
On Jan. 19, RBC Royal Bank lifted its price target on National Retail Properties from $43 to $48, while maintaining a rating of Sector Perform.
Earlier in the month, analyst Linda Tsai of Jefferies upgraded National Retail Properties from Hold to Buy, while markedly increasing the price target 23% from $42 to $52.
National Retail Properties had a total return of 4.09% in January. It will announce fourth-quarter earnings on Feb. 7.
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