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Investing.com - Morgan Stanley (NYSE:MS) upgraded AvalonBay Communities (NYSE:AVB) from Equalweight to Overweight on Wednesday, while slightly lowering its price target to $225.00 from $228.00. The residential REIT giant, with a market capitalization of $26.58 billion, currently trades at a P/E ratio of 22.92.
The investment bank cited AvalonBay’s position as the worst-performing apartment stock year-to-date, with InvestingPro data showing a -13.58% YTD return, creating a buying opportunity as its valuation has fallen in line with peers despite superior growth prospects and a healthy 3.74% dividend yield.
Morgan Stanley highlighted AvalonBay’s projected best-in-class earnings growth among apartment stocks for 2025, 2026, and 2027, noting these estimates may even be conservative.
The firm pointed to AvalonBay’s $2.9 billion in pre-funded and de-risked development projects as a significant growth driver, particularly in 2026 and 2027, which it believes the market may be overlooking.
Morgan Stanley also noted AvalonBay’s diversified Washington DC exposure provides insulation from potential government job losses, while its current valuation no longer reflects a premium despite having the strongest earnings growth outlook in its sector.
In other recent news, AvalonBay Communities reported its second-quarter 2025 earnings, with a significant earnings per share (EPS) beat. The company achieved an EPS of $1.88, which exceeded the forecasted $1.20, representing a 56.67% surprise. However, the company’s revenue did not meet expectations, coming in at $689.9 million compared to the anticipated $757.59 million, marking an 8.93% shortfall. Despite the positive EPS results, AvalonBay’s stock experienced a decline in after-hours trading. These developments are part of the recent updates surrounding AvalonBay Communities.
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