Stifel Downgrades Essex Property Trust, Citing Below-Average FFO Growth And Market Challenges

Stifel analyst Simon Yarmak downgraded Essex Property Trust Inc ESS to Hold from Buy with an increased price target of $250 (from $245).

The analyst sees ESS as one of the top-performing REITs this year but believes the shares have reaped benefits from AI trade and have their run.

Yarmak is bearish on the company's below-average FFO growth (2.5% vs. 5.2% CAGR) and the expected continued lag of West Coast multifamily fundamentals vs. East Coast peers in the near term.

Although both ESS and the Multifamily sector have witnessed outperformance since 1Q-end (ESS +17.1% vs. Multifamily Sector +10.7% vs. RMS +5.4%), the analyst notes that rising interest rate has made it challenging for the customers to buy single family homes and thus keeping renters longer in apartments.

Consequently, Yarmak reduced FFO estimates to $14.89 (vs. $14.94) in 2023 and $15.23 (from $15.36) in 2024. 

Also Read: Analyst Downgrades 4 REITs In One Morning: Is Your Stock One Of Them?

Price Action: ESS shares are trading lower by 1.76% at $238.27 on the last check Tuesday.