Why This Analyst Is Upgrading REIT AvalonBay, But Downgrading Camden Property Trust

Some REITs (real estate investment trusts) reported outsized first-quarter earnings.

Still, recessionary fears linger and, in case demand weakens in the residential REIT sector, suburban could outperform urban properties.

Meanwhile, coastal is likely to outperform sunbelt, according to Bank of America Securities.

The Analyst: Joshua Dennerlein recommends favoring companies with less supply risk.

Check out other analyst stock ratings.

The AvalonBay Communities Rating Change: Dennerlein upgraded the rating for AvalonBay Communities Inc AVB from Neutral to Buy, while raising the price target from $199 to $212.

“Demographics suggest we are at or past peak demand for urban apartments,” the analyst wrote. “AVB’s portfolio and development strategy positions them well to capture the rotation."

AvalonBay Communities is poised to benefit from declining construction pricing and better opportunities for land acquisitions, he added

The Camden Property Trust Rating Change: The analyst downgraded Camden Property Trust CPT from Buy to Neutral, while reducing the price target from $132 to $121.

The near-term supply threat “grows in Sunbelt,” Dennerlein said, adding, “Sunbelt supply resulted in higher concession and led to a pause in the ability to push new lease rate growth."

Rent growth, over the last three years, has stretched affordability.

AVB, CPT Price Action: Shares of AvalonBay Communities had declined Monday by 0.51% to $179.26, while Camden Property Trust had lost 1.50% to $108.84 at the time of writing.

Image by Nattanan Kanchanaprat from Pixabay