Jefferies Upgrades Agree Realty On Favorable Fed Environment, Acquisition Strategy

Agree Realty Corporation ADC has consistently risen over the last five years, and Jefferies anticipates a steep jump to new highs.

The Analyst

Jefferies analyst Omotayo Okusanya upgraded Agree from Hold to Buy and raised the price target from $60 to $70.

The Thesis

By Okusanya’s model, Agree should benefit from a more dovish Fed. (See the analyst's track record here.)

A slowing schedule of interest rate raises lessens the risk of higher costs compressing investment spreads, he said in the Thursday upgrade note.

Jefferies expects heightened acquisition volume to bolster the bottom line through 2019.

“ADC continues to fire on all cylinders as accretion from acquisitions continues to drive earnings growth,” Okusanya said. “Given the company’s pipeline and minimal competition for assets, we expect ADC to continue to take advantage of its attractive spread investing in 2019.”

Jefferies anticipates risk in commodified retail segments like PetSmart, and is watching for credit risk within the portfolio as an indication of impending multiple compression. Nonetheless, Agree has largely insulated itself from challenges in the retail environment by focusing on internet-resistant categories, the analyst said.

“We believe the premium is warranted given the focus on one-off and off-market transactions which results in better spreads and the Partner Capital Solutions business, which does build-to-suit development at attractive yields."

Price Action

Agree Realty shares were trading up 1.45 percent to $61.51 at the time of publication Thursday.

Related Links:

How Agree Realty Went From A $300 Million Microcap To $1.5 Billion Business

The Rise Of A Quiet Thematic ETF