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On Tuesday, BMO Capital Markets updated its outlook on Broadstone Net Lease (NYSE:BNL), raising the price target from $19.00 to $20.00, while reiterating an Outperform rating on the stock. The adjustment follows recent investor meetings with Broadstone’s CEO & Director, John Moragne, and EVP, CFO, and Treasurer, Kevin Fennell, where the company’s revised strategy was a primary topic of discussion.
The investment firm’s analysis highlighted Broadstone Net Lease’s strategic shift towards build-to-suit (BTS) developments and revenue-generating capital expenditures. This approach diverges from the company’s previous focus on merely acquiring properties at a spread. The new strategy is designed to create value and address tenant issues proactively, rather than engaging in sales. InvestingPro analysis shows the company maintains strong financial health with a current ratio of 2.1, indicating ample liquidity to support this strategic pivot.
Broadstone has set a target to achieve mid-single-digit earnings growth by 2026 and beyond, driven by its BTS initiative. This pivot into BTS projects was partly a result of the company’s cost of capital considerations. The strategy offers attractive returns compared to Broadstone’s weighted average cost of capital (WACC), provides access to new product, and could serve as a potential funding source by selling at a premium to cost, although selling is not the company’s preferred option. With a market capitalization of $3.31 billion and a track record of raising dividends for five consecutive years, as highlighted by InvestingPro, the company appears well-positioned to execute its growth strategy.
BMO Capital’s updated analysis also acknowledges Broadstone’s role in filling a financing gap left by traditional banks. The company is offering comprehensive financing solutions for 100% pre-leased projects, including land acquisition, construction financing, and permanent financing for developers.
In light of these discussions and the revised strategy, BMO Capital has updated its earnings estimates for Broadstone Net Lease and increased the target price by $1 to $20, with a continued Outperform rating. This reflects confidence in the company’s ability to execute its new strategy and deliver on its growth targets.
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