Bank of America just raised its EUR/USD forecast
On Wednesday, Essential Properties Realty Trust (NYSE:EPRT), a $5.95 billion market cap REIT, experienced a change in stock rating as B.Riley analysts downgraded the company from Buy to Neutral. The firm also adjusted the price target for Essential Properties stock to $33.50, up from the previous $29.50. The adjustment follows the company’s fourth-quarter 2024 results, which matched expectations with Adjusted Funds From Operations (AFFO) per share in line with the consensus. According to InvestingPro data, the stock appears slightly overvalued at current levels, trading at a P/E ratio of 27.28x. Additionally, the 2025 guidance showed minimal changes.
The analysts at B.Riley cited Essential Properties’ valuation as the primary reason for the downgrade. They noted that while the real estate investment trust (REIT) has been trading at high multiples and a significant premium to its real estate net asset value (reNAV) per share, these factors reflect its strong growth profile and recent underwriting success. This growth is evidenced by the company’s impressive 25.03% revenue growth over the last twelve months, as reported by InvestingPro, which maintains a "GREAT" overall financial health score for EPRT. However, they believe that the company’s operations are starting to align more closely with industry averages, which could diminish the likelihood of continued outperformance relative to its peers.
The report also highlighted that the capitalization rates for Essential Properties’ investments have been converging with those of its peers in recent quarters. This trend was acknowledged by the REIT’s management during the fourth-quarter 2024 earnings call, with indications that cap rates may continue to drift towards the mid-to-high 7% range in the fiscal year 2025.
Despite these concerns, B.Riley acknowledged the positive aspects of Essential Properties’ performance, including limited exposure to the bankrupt carwash operator Zips. The analysts expressed that these factors have been taken into account but still believe a more cautious stance is warranted based on the current valuation metrics.
Essential Properties Realty Trust has not publicly responded to the rating downgrade and price target adjustment as of yet. The stock’s performance following this news will be closely watched by investors and market analysts. Worth noting is the company’s strong dividend profile, having raised its dividend for 7 consecutive years, with a current yield of 3.72%. Investors seeking deeper insights into EPRT’s valuation and growth prospects can access comprehensive analysis through InvestingPro, which offers exclusive access to detailed financial metrics and additional ProTips.
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