Yahoo Finance AvalonBay Communities Stock Up 25% in Six Months: Will It Rise More?
Shares of AvalonBay Communities AVB have rallied 25% over the past six months, outperforming the industry's upside of 18.1%.
In September 2024, in its third-quarter operating update, AVB noted that it experienced an increase in economic occupancy but a deceleration in its like-term effective rent change in August vis-a-vis July and the previous quarter of 2024.
This residential REIT is well-poised to gain from the healthy renter demand for its residential properties in the high barrier-to-entry regions of the United States. The company’s efforts to leverage technology, strategic buyouts and development projects, backed by a healthy balance sheet position, augur well for long-term growth.
Analysts seem bullish on this Zacks Rank #3 (Hold) company, with the Zacks Consensus Estimate for its 2024 FFO per share revised upward over the past month to $11.02.
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Factors Behind AVB Stock Price Surge: Will the Trend Last?
AvalonBay has high-quality assets located in the leading metropolitan areas where the market is characterized by growing employment in the high-wage sectors of the economy, higher home ownership costs, and a diverse and vibrant quality of life. With these tailwinds by its side, AvalonBay remains well-poised for growth. In September 2024, the company announced that it witnessed an increase in economic occupancy for its same-store residential portfolio at 95.6% in August, up from 95.5% in July.
To enhance its overall portfolio quality, AvalonBay has carried out several strategic acquisitions over the years. The company optimizes its portfolio by increasing allocation to suburban submarkets and expansion regions and making accretive investments in the existing portfolio. As per AVB’s September performance update, the company expects its current 71% suburban submarket allocation to achieve the 80% target and the current 8% expansion region allocation to reach a target of 25% in due course of time. Such efforts are likely to bolster the company’s external growth in the upcoming period.
AvalonBay has an encouraging development pipeline. As of June 30, 2024, the company had 17 consolidated development communities under construction. Over the next few years, the developments underway are expected to deliver meaningful incremental net operating income (NOI) upon completion and stabilization and are expected to fuel FFO and net asset value (NAV) growth. The company is on track to realize roughly $10 million of incremental NOI from its operating initiatives in 2024.
AvalonBay is leveraging technology, scale and organizational capabilities to drive margin expansion across its portfolio. It focuses on enhancing self-serve digital offerings to customers to provide them with a seamless and personalized experience. Such efforts are likely to bring about operational efficiency and reduce costs, aiding NOI growth.
AVB maintains a healthy balance sheet position. As of June 30, 2024, the company had $545.8 million in unrestricted cash and cash equivalents. As of the same date, AvalonBay did not have any borrowings outstanding under its $2.25 billion unsecured credit facility. The company has a well-laddered debt maturity schedule with a weighted average year-to-maturity of 7.3 years. In the second quarter of 2024, its annualized net debt-to-core EBITDAre was 4.2 times. From the beginning of 2024 through July 31, 2024, the unencumbered NOI was 95%, providing scope for tapping the additional secured debt capital if required.
Key Risks for AVB
An elevated supply of rental units in certain markets is likely to fuel competition and curb pricing power, impeding the rent growth momentum for AVB to some extent. In September 2024, AVB announced that it experienced a 3.5% deceleration in its like-term effective rent change for its same-store residential portfolio in August, down from 3.6% in July. The figure also marked a decrease from 3.7% in the second quarter.
Stocks to Consider
Some better-ranked stocks from the residential REIT sector are Essex Property Trust ESS and Centerspace CSR,each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Essex Property Trust’s 2024 FFO per share is pegged at $15.55, up 3.46% year over year.
The Zacks Consensus Estimate for Centerspace’s2024 FFO per share is pegged at $4.83, up 1.05% year over year.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.
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AvalonBay Communities, Inc. (AVB) : Free Stock Analysis Report
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