realestate

Real estate stocks attract analysts' attention

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    Camden Property Trust (NYSE:CPT) recently received a downgrade from RBC Capital Markets analyst Brad Heffern, who moved the rating from Outperform to Sector Perform while maintaining a price target of $122. Despite reporting stronger-than-expected July quarter results, Heffern believes these results were largely driven by the peak leasing season rather than improving fundamentals. He expects the company to miss its guidance for the back half of 2024, stating that "another long fall/winter for the Sun Belt" could be on the horizon. Heffern also noted that while tapering supply is in sight, a potential demand problem could arise if move-outs return to normal levels as rates come down.

    Invitation Homes Inc (NYSE:INVH) was also downgraded by Heffern from Outperform to Sector Perform, with the price target lowered from $37 to $36. The leasing spreads for Invitation Homes in the third quarter showed further deceleration, according to Heffern, who believes renewals are experiencing a higher level of tenant pushback on rate increases. With mortgage rates moving lower, for-sale housing could potentially become a headwind. Heffern noted that given the high average resident income, tenants are more likely to afford a house, stating, "We continue to think 2025 consensus estimates are too high, especially with headwinds from INVH's swaps rolling off."

    LGI Homes Inc (NASDAQ:LGIH) received an upgrade from underperform to Neutral by Wedbush analyst Jay McCanless, along with a price target increase from $97 to $125. LGI Homes generated sales absorption of 4.6 homes per month in August, the highest pace since December 2023, according to McCanless. The company appears to be on track to achieve the forecasted closing of 1.8k homes in F3Q24 assuming September's sales absorption and community count are in line with August's levels. The catalysts for the stock include a potential pullback in share price from Aug. 30 to Sept. 6, a potential positive cash flow reversal, and steady declines in mortgage rates so far in the third quarter. Cash flow trajectory should shift from a net outflow to a net inflow during F4Q24 and F1Q25.

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Analysts gather around a stock market board in New York City.