The website Apartment List recently published a survey that revealed a 10% increase in rents in the previous year. Following a significant increase in the price of many REIT stocks, Wall Street analysts have a wide range of opinions on which stocks will perform the best in the future. According to analysts, a down week has created a buying opportunity for some of the stocks.
Avalon Bay, Apartment Income REIT, American Homes 4 Rent, and UDR all fell by less than 2%, while Essex Property Trust fell by slightly more than 3%.
In the last year, three residential REITs have risen to the top ten of the S&P Retail sector, with Mid-America Apartment Communities increasing by 59 percent, Equity Residential increasing by 49.6 percent, and UDR increasing by 48 percent.
BTIG recently raised its price target on Avalon Bay from $251 to $285 per share. That is nearly 30% higher than the stock’s current price of $222 per share. Analyst James Sullivan wrote to clients about the industry as a whole, saying, “We expect strong demand to continue for several quarters, and certainly into 2022.”
Furthermore, BTIG believes that “high current occupancy rates will allow owners to push rates.”
American Homes 4 Rent is a single-family home rental company that operates in 22 states. The stock has risen 36% so far this year, but has fallen in recent weeks, hovering around 4% below its high from late July.
JPMorgan has an overweight rating on the stock, stating that the company’s “core trends are very strong as the single family rental business continues to be one of the best segments across the real estate landscape.”
Essex Property Trust is another REIT that Wall Street sees as a buy even after a recent run-up. So far this year, it is up 32% to $314. Morgan Stanley has a price of $344, which is about 10% higher than current levels. Analyst Richard Hill warned clients that if they are thinking about buying now, they should be aware of the risks. A sudden drop could be caused by “greater than expected delays in supply deliveries.”
Mid-America Apartment Communities is the best performing residential REIT in the S&P Real Estate sector year to date, up 47 percent. The majority of the apartments in the company are located in the south and southwest. In this case, Barclays believes the run is coming to an end.
The firm is underweight the stock and stated last week in a client note that “positive demographic and migration trends, as well as positive rental rate growth,” are already baked in.
However, the firm believes that another REIT, UDR, “benefits from diversification across property types, location, and geography.” So far in 2021, UDR is up 38.5 percent.
Infrastructure bill and clean energy
The Senate-approved package is significantly reduced from what President Joe Biden first announced in March, but some of the measures left out of the most recent iteration of the bill could be included in the spending plan. The Senate approved a budget resolution on Wednesday, which is the first step toward Democrats passing a $3.5 trillion spending plan.
Nonetheless, the current infrastructure bill, which pledges $550 billion in new spending, will have an impact on the clean tech universe
Power infrastructure and the electrical grid are two major areas of spending, with at least $65 billion allocated to the nation’s grid.
The funding would be used to establish the Grid Deployment Authority, invest in advanced transmission research and development, and promote smart grid technologies, among other things. Electrical solution companies such as Quanta, Wesco, and NV5, as well as grid management company Itron, are among the names exposed to this theme, according to research firm Strategas.
Itron, based in Washington, assists utilities in managing, analyzing, and comprehending their water and power usage. As wildfires rage in the Western United States, the company has assisted utilities in hardening and upgrading their infrastructure, both to reduce the risk of starting a fire and to limit and localize power outages when absolutely necessary.
“While the bill calls for significant grid-based investments, we believe the commitment to electric transmission is the most important aspect, given its critical role in enabling broader renewables developments,” JPMorgan.
First Solar, the largest U.S.-based solar panel producer, is one of the stocks exposed to the renewable energy theme. Maxeon, as well as energy management companies like Enphase Energy and SolarEdge, could benefit. Wind power companies such as Orsted, Vestas, and General Electric operate within the wind power ecosystem, while utilities such as NextEra Energy are developing grid-scale renewable energy resources.
The bill also includes $7.5 billion for electric vehicle charging infrastructure, including a national charging network. President Joe Biden signed an executive order earlier this month requiring electric vehicles to account for 50% of new car sales by 2030.
Electric vehicle charging is being worked on by ChargePoint Holdings, Beam Global, and Blink Charging.
The bill also includes funding for electric mass transit, with $2.5 billion dedicated to zero-emission buses, low-emission buses, and ferries, respectively. Proterra, Plug power, and Blue Bird are among the companies that have been exposed to this theme.
Carbon capture and hydrogen are two other areas funded by the bill.
ALPS Clean Energy ETF, iShares Global Clean Energy ETF, and Invesco WilderHill Clean Energy ETF are some exchange-traded funds that track the energy transition theme for investors looking for broad exposure.