Analysts’ opinions are quite important when it comes to stock prices. An upgrade or downgrade can quickly move a stock’s price and lift or lower an analyst’s target price. The target price can also guide investors as to the potential long-term appreciation or depreciation of a stock.
But the best analysts are only right about 50% of the time. And what does an investor do when the same analyst is the most optimistic or pessimistic among fellow analysts about several stocks in a particular sector?
Take a look at what one analyst says are the three residential real estate investment trust (REIT) stocks with the highest upside and how some of his peers view the same stocks.
Camden Property Trust (NYSE:CPT) is a Houston-based residential REIT that owns and manages over 240,000 square feet of apartment complexes in major cities across the U.S. Some of its apartment complexes also contain ground-floor retail space, offices or mixed-use space.
Camden Property Trust pays a dividend of $3.76, which has grown 25% over the past five years with no cuts or eliminations. It presently yields about 3.1%.
Barclay’s analyst Anthony Powell recently maintained an overweight position on Camden Property Trust while lowering the target price from $174 to $169. From its recent price, that represents a potential upside of 43%, the highest among residential REITs.
Evercore ISI Group analyst Steve Sakwa was not quite as optimistic, lowering his price target twice within two weeks, from $158 to $147. But that’s still a 25% upside from Camden Property Trust’s recent price.
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Mid-America Apartment Communities Inc. (NYSE:MAA) is another residential REIT that owns and manages over 101,000 units in nearly 300 communities across 16 states.
The Germantown, Tennessee-based REIT pays an annual dividend of $5 per share, currently yielding about 3.3%. The dividend has grown by 43% over the past five years, with no cuts or eliminations.
Barclay’s Powell also recently maintained an overweight position on Mid-America Apartment Communities and raised its price target from $211 to $215. This presents a potential upside of 41% from its recent price.
However, analyst Haendel St. Juste of Mizuho Bank was far less sanguine, maintaining a neutral position and nudging the price target down from $178 to $177.
Equity Residential (NYSE:EQR) is a Chicago-based REIT that boasts over 300 apartment buildings located in large urban areas, such as Boston, New York, Washington, D.C, Seattle, San Francisco and Denver.
Equity Residential pays an annual dividend of $2.50, which currently yields about 3.8%. The dividend has grown 24% over the past five years with no cuts nor eliminations over that time.
Barclay’s Powell also maintained an equal-rate position on Equity Residential, while raising the price target from $83 to $88. That increase now presents Equity Residential with a potential upside of 35%.
But Powell’s target price was much higher than several other analysts who wrote about Equity Residential. Sakwa of Evercore ISI Group sees $81 as a more realistic target price, and John Kim of BMO Capital Markets even downgraded Equity Residential from outperform to market perform, while slicing his target price from $88 to $74. That only equates to 13% of upside potential from its recent price.
So where does that leave investors? The most prudent advice is to consider analyst opinions as a guide to potential appreciation but still assess stocks by their fundamentals and/or technical indicators before making any purchases.
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