3 REITs With Recent Analyst Downgrades

3 REITs With Recent Analyst Downgrades

3 REITs with Recent Analyst Downgrades

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Wall Street analysts wield enormous influence over the markets. A favorable or unfavorable mention of a stock by a well-known analyst or brokerage can cause a stock to rise or fall by several percentage points in a day. In the event of a significant downgrade or reduction in the price target, recovery of a security may take weeks or even longer.

An upgrade or downgrade may also prompt other analysts to announce new, similar ratings, resulting in even greater gains or losses.

Here are three REITs that recently received analyst rating downgrades and whose stock prices declined following analyst calls:

CubeSmart (NYSE:CUBE) is an internally managed, Malvern, Pennsylvania-based company Self-storage REIT with more than 1,400 storage facilities across the United States, it went public in 2004 as U-Store-It. In 2011, it was renamed CubeSmart. Between 2012 and 2022, CubeSmart increased its funds from operations (FFO) per share by 242%. Its same-store occupancy rate was recently 90.4%, compared to 91.7% in the first quarter of 2023.

On May 29, BMO Capital analyst Juan Sanabria downgraded CubeSmart’s rating from “Outperform” to “Market Perform” and lowered the price target from $50 to $47.

On April 25, CubeSmart reported mixed operating results for the first quarter of 2024. FFO of $0.64 per share missed the consensus estimate by a penny. However, revenue of $261.406 million beat the consensus estimate of $242.356 million and represents a slight increase from Q1 2023 revenue of $256.528 million.

The morning after the downgrade, CubeSmart’s stock price was down 3.35%.

AFC Gamma Inc. (NASDAQ:AFCG) is a West Palm Beach, Florida-based specialty mortgage investment trust (mREIT) that provides higher interest rate bridge loans and direct lending to the commercial real estate industry. Its loans range from $10 million to $100 million or more. At the end of the first quarter of 2024, AFC Gamma had committed $493 million in loans.

In February 2024, AFC Gamma announced that it would focus exclusively on cannabis lending after spinning off its commercial real estate portfolio into an independent REIT called Sunrise Realty Trust, with a completion date of mid-2024. Sunrise Realty Trust will ultimately trade under the symbol SUNS.

On May 28, Compass Point analyst Merrill Ross lowered AFC Gamma’s rating from “Neutral” to “Sell” and announced a $10 price target.

It’s easy to see why Ross called it a “Sellout.” On May 9, AFC Gamma publishes its results for the first quarter of 2024 of $0.49 per share, missing the consensus estimate of $0.51 and experiencing a 14.04% decline from Q1 2023 earnings of $0.57 per share. Revenue of $14.76 million also missed the consensus estimate of $16.24 million and was 12.32% lower than Q1 2023 revenue of $16.83 million in the same quarter of the year last.

The AFC Gamma share price fell 6% on the day the downgrade was announced.

REP Properties (NYSE:REP) is a diversified experiential REIT based in Kansas City, Missouri, that owns and operates 288 properties, including movie theater chains, amusement parks, ski resorts, fitness centers and other venues leisure with 200 tenants in 44 states. It also has 61 early childhood education centers and nine private schools. At the end of the first quarter of 2024, it had an occupancy rate of 99%.

On May 1, EPR Properties reported its first quarter 2024 operating results. FFO of $1.13 missed the consensus estimate of $1.15. Revenue of $167.232 million beat the consensus estimate of $150.206 million, but declined from first-quarter 2023 revenue of $171.396 million.

EPR Properties also reaffirmed its 2024 FFO forecast of $4.76 to $4.96. The Street’s estimate was $4.87.

On May 20, Banc of America Securities analyst Joshua Dennerlein downgraded EPR Properties from “Neutral” to “Underperform” and lowered the price target from $45 to $40. However, on May 28, RBC Capital analyst Michael Carroll maintained the “sector perform” rating on EPR properties while lowering the price target from $49 to $48.

EPR Properties has fallen nearly 6% since Bank of America’s rating downgrade. In February, EPR increased its monthly dividend from $0.275 to $0.285 per share. With the new dividend and the drop in the share price, the yield now stands at 8.5%.

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