Spirit Realty Capital Inc SRC has completed the spin-off of SMTA REIT. Following this move, the company’s key fundamental metrics are comparable to its peers and the stock offers growth opportunities at a reasonable valuation, according to Morgan Stanley.
The Analyst
Morgan Stanley’s Vikram Malhotra upgraded Spirit Realty Capital to Overweight and raised the price target to $49.
The Thesis
After eliminating flat, non-property management fees, Spirit Realty Capital is expected to generate AFFO growth of around 3 percent in 2020 and north of 3.3 percent in 2021, which is in-line with several peers, Malhotra said in the upgrade note.
The analyst added that the company’s tenant concentration is lower than peers, as it derives 24.4% of NOI from its top 10 tenants, versus the peer average of 29.7%. Spirit Realty Capital’s leverage and dividend payout are comparable to peers.
Although the company’s share price has outperformed year to date, further upside may be driven by steady execution. Malhotra added that many Triple Net REIT stocks were trading near record highs and investors could begin looking for stocks that offer growth opportunities at a reasonable price.
Price Action
Shares of Spirit Realty Capital traded around $44.76 at time of publication.
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