Truist Securities Lifts Price Targets on Seven REITs

Stock analysts are well respected on Wall Street for their expertise in rating stocks and assigning price targets. However, analysts are sometimes criticized for playing "Follow the Leader" with one another. In other words, if one analyst publishes a report on a stock or a sector of stocks, other analysts will often release reports on the same or similar stocks within a few days or weeks.

On June 17, JP Morgan analyst Anthony Paolone maintained ratings on eight Residential REITs and raised each REIT's price target.

Only a week later, on June 24, Truist Securities analyst Michael Lewis maintained ratings on seven Residential REITs and increased the price targets on six.

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Were the two analysts in sync, or were there differences? Take a look at the Truist analyst's ratings and targets and see how they compare with those last week by the JP Morgan analyst: 

On June 24, Truist Securities analyst Michael Lewis maintained a Buy on UDR Inc UDR, Equity Residential EQR, and Camden Property Trust CPT. He raised the price targets on UDR from $42 to $44, Equity Residential from $67 to $73 and Camden Property Trust from $114 to $122.

Analyst Lewis maintained AvalonBay Communities Inc AVB, NexPoint Residential Trust NXRT and Essex Property Trust ESS with Hold ratings. He raised the price targets on AvalonBay from $207 to $213, NexPoint Residential from $34 to $37 and Essex Property from $255 to $282. 

There was only one Residential REIT that analyst Lewis viewed with less enthusiasm, maintaining Veris Residential VRE on Hold but lowering the price target from $15 to $14.

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The table below compares the ratings and price targets of both analysts on the same six stocks:

What can investors conclude from this table?

The Truist analyst, Lewis, is far more optimistic about the price targets than his counterpart, Paolone. Lewis' price targets were higher than Paolone's on all six REITs, both in the previous and new targets.

Analyst Lewis also seemed more optimistic with Buy ratings on three of the six REITs, while analyst Paolone had an Overweight on only one REIT. The Hold and Neutral ratings seem similar in meaning, while analyst Paolone's Underweight would appear to be more negative than Lewis' Hold.

It must be noted that analyst Lewis had the advantage of releasing his reports after analyst Paolone. It sometimes seems that analysts try to "one-up" each other and perhaps that accounts for the somewhat higher price targets of the Truist analyst.

Additionally, analyst Lewis maintained mid-America Apartment Communities MAA and raised the price target from $148 to $156 and NexPoint Residential Trust NXRT while raising its price target from $34 to $37.

Analyst Paolone did not release a report on mid-America or NexPoint Residential but did maintain a Neutral rating on Invitation Homes INVH and American Homes 4 Rent Class A AMH, raising the price target of the former from $35 to $36 and the latter from $37 to $38. Analyst Lewis did not report on those two REITs.

Regardless of the differences between the two analysts on ratings and target prices, both analysts share the view that Residential REITs should improve their performance over the next 12 months. The difficulty encountered by the Millennial and Gen Z demographic groups in purchasing homes in a high-interest-rate, high-priced home market environment means more demand for rental homes and apartments, and that's a positive for Residential REIT earnings until one or both of those marketplace headwinds change.

Earlier this year, investors expressed concerns that constructing new apartments and homes for rent would increase supply and diminish occupancy levels. However, with higher costs for materials and labor, it will be difficult for the newly constructed units to compete with the rents of the older communities. That bodes well for the occupancy rates of the REITs the two analysts were considering.

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