B.Riley has increased the price target on Whitestone REIT (NYSE: NYSE:WSR) to $15.00 from the previous $14.00 while keeping a Neutral rating on the stock.
The firm's analyst cited Whitestone REIT's year-to-date performance, which includes robust rent and occupancy growth.
This was particularly evident in the company's second quarter of 2024, where same-store net operating income (SSNOI) grew by 6.6%. In addition, management has raised its 2024 estimated SSNOI growth guidance by 50 basis points at the midpoint along with its earnings.
The analyst also pointed to potential long-term growth drivers for Whitestone REIT. These include expected decreases in general and administrative expenses due to the settling of lawsuits related to former employees.
Another factor is the possible resolution at Pillarstone REIT, which could further reduce costs. Moreover, the potential liquidation of Pillarstone may yield significant cash proceeds for WSR.
Despite these positive indicators, the timeline for these catalysts remains uncertain. The analyst expressed caution, noting that macroeconomic headwinds could disproportionately affect shopping center REITs like Whitestone.
Additionally, the focus of Whitestone REIT on smaller, local tenants could present challenges. Although management has emphasized the resilience of these tenants and the benefits of active property management, the analyst suggested that the market might adopt a "show me" attitude towards the performance of small tenants in the event of economic turbulence. Finally, the fading of merger and acquisition discussions surrounding Whitestone, which may have previously expanded the stock's multiple, could also pose valuation headwinds.
Whitestone REIT has reported strong growth in the second quarter of 2024, with significant increases in leasing spreads, same-store net operating income (NOI), and occupancy rates.
The company reported a 17.5% increase in leasing spreads on a straight-line basis and a 7.7% increase on a cash basis. Same-store NOI grew by 6.6%, and occupancy rates rose to 93.5%, a 20 basis point improvement from the previous year.
In addition to these financial results, Whitestone REIT has announced plans to strengthen its board of trustees with the addition of two new independent members. The company has also raised its full-year same-store NOI guidance range to between 3% and 4.5%.
Furthermore, Whitestone REIT financed $56 million of secured debt maturing in 2031 and plans to sell $20-30 million of properties in the remaining year.
In terms of strategic initiatives, Whitestone REIT is executing a capital recycling plan to be capital neutral, with acquisitions outpacing dispositions by approximately $20-25 million for the year.
The company is focusing on targeting higher household incomes and average base rents through new acquisitions.
InvestingPro Insights
As B.Riley acknowledges the growth potential of Whitestone REIT (NYSE:WSR), it's also insightful to consider the company's financial metrics and market performance. According to InvestingPro data, Whitestone REIT has a market capitalization of approximately $672.87 million and is trading at a high earnings multiple, with a P/E ratio of 41.57. This is notably higher than the adjusted P/E ratio for the last twelve months as of Q2 2024, which stands at 61.3. The company's revenue growth over the last twelve months was 4.33%, indicating a steady upward trajectory.
Adding to the company's appeal, Whitestone REIT has not only maintained its dividend payments for 15 consecutive years but has also raised its dividend for 3 consecutive years, showcasing a commitment to returning value to shareholders. The dividend yield as of the latest data stands at 3.68%, which is competitive within the sector. These InvestingPro Tips suggest that while the company is trading at a high earnings multiple, its consistent dividend payments and recent growth in SSNOI could be attractive to income-focused investors. For those interested in a deeper analysis, InvestingPro offers additional tips on Whitestone REIT's financial health and future outlook.
It's worth noting that Whitestone REIT's current price is near its 52-week high, at 92.79% of the peak, which aligns with B.Riley's adjusted price target of $15.00. The company's next earnings date is projected for October 30, 2024, which will provide further insights into its performance and potential impact on the stock's valuation.
For readers seeking more comprehensive investment analysis, there are numerous additional InvestingPro Tips available, which can be accessed to inform investment decisions regarding Whitestone REIT.
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