On Wednesday, Raymond James raised its rating for Netstreit Corp. (NYSE:NTST) stock, a real estate investment trust, from Outperform to Strong Buy, while revising its price target downward to $19 from the previous $20. The upgrade comes despite the stock's underperformance compared to its peers year-to-date.
The firm's decision to upgrade Netstreit's shares is largely based on the current valuation of the stock. Netstreit's performance has lagged behind the broader market, which the analyst attributes to the perceived risks associated with the company's tenant exposure.
Notably, Netstreit has tenancy ties with Big Lots (NYSE:BIG), Walgreens, and Family Dollar, which account for 1.4%, 5.9%, and 1.2% of its annual base rent (ABR), respectively.
Concerns have been raised regarding Big Lots' potential financial instability, with speculations of bankruptcy on the horizon. However, Raymond James believes that the financial impact on Netstreit would be minimal even if Big Lots were to vacate.
The firm expresses confidence in Netstreit's ability to re-tenant effectively, emphasizing that Big Lots represents only 1% of Netstreit's rent.
Walgreens, another significant tenant, has also been the subject of media attention, but Raymond James assesses the economic risk to Netstreit as minimal.
The analyst points out that only one Walgreens lease is set to expire before 2029, suggesting that there is no immediate threat of bankruptcy affecting Netstreit's revenues from Walgreens leases.
The analysis of Netstreit's position and the outlook for its tenancy relationships underpin the investment firm's positive stance on the stock. The upgraded rating and revised price target reflect a belief in the company's resilience and potential for growth despite the challenges presented by its tenants' market positions.
In other recent news, NETSTREIT Corp. has initiated a new at-the-market equity offering program, allowing the real estate investment trust to sell up to $300 million of its common stock.
The new program, which involves agents such as Wells Fargo (NYSE:WFC) Securities and BofA Securities, replaces a prior agreement under which NETSTREIT sold approximately $108.1 million in common stock.
The company plans to use the proceeds from this offering for general corporate purposes, including potential property acquisitions and development activities.
In recent financial developments, NETSTREIT reported a net loss of $2.3 million in Q2 2024 but declared a quarterly cash dividend of $0.21 per share.
The company also reported over $116 million in gross investment activity at a 7.5% blended cash yield, and added Life Time Fitness as a new tenant, demonstrating a commitment to portfolio diversification. NETSTREIT's portfolio now comprises 649 investments, leased to 90 tenants across 45 states.
The company maintains its 2024 AFFO per share guidance of $1.25 to $1.28. NETSTREIT's new CEO is expected to focus on optimizing a larger portion of the source, and the company plans to extend debt maturities in the coming years. These recent developments suggest a steady path forward for NETSTREIT, despite recent challenges.
InvestingPro Insights
Netstreit Corp. (NYSE:NTST) appears to be a company on the rise according to recent data and analysis. With a market capitalization of $1.27 billion, the company is positioned in a market that acknowledges its growth potential. Analysts have good reason to be optimistic about the company's future, with an expected increase in net income and sales growth in the current year. This optimism is supported by a substantial 30.09% revenue growth over the last twelve months as of Q2 2024, indicating a strong upward trend in the company's financial performance.
Moreover, Netstreit's ability to cover its short-term obligations is solid, with liquid assets surpassing short-term liabilities, which may provide additional comfort to investors concerned about the company's financial resilience. Additionally, the InvestingPro Tips suggest that despite trading at a high earnings multiple with a P/E ratio of 236.67, the company is anticipated to maintain profitability this year, as it has already been profitable over the past twelve months.
For those looking to delve deeper into the company's prospects, there are several more InvestingPro Tips available that could further inform investment decisions. With a price target revision and an upgrade from Raymond James, Netstreit's stock presents an interesting opportunity for investors seeking to capitalize on the company's growth trajectory and market position.
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