Evercore ISI initiates coverage on Realty Income stock with In Line rating

Investing.com - Evercore ISI has initiated coverage on Realty Income (NYSE:O) with an In Line rating and a $62.00 price target, according to a research note released Wednesday. The REIT, which boasts impressive gross profit margins of 92.65% and has maintained dividend payments for 32 consecutive years according to InvestingPro data, has seen its shares rise 18.77% year-to-date.

The firm’s analysis highlights several key debates surrounding the real estate investment trust, including whether Realty Income’s scale is hindering growth, with Evercore projecting a 2.8% compound annual growth rate (CAGR) for adjusted funds from operations (AFFO) from 2025-2028, below the company’s historical 5% long-term average. InvestingPro analysis reveals the company maintains strong financial health with a "GREAT" overall score, suggesting resilience despite growth concerns.

Evercore also questions the financial impact of Realty Income’s private capital platform, noting that investors will need to wait until early 2026 for details on its initial earnings contribution, with the firm modeling $0.01 AFFO contribution in 2026 and $0.02 in 2027.

The $62 price target implies a 9% total return including the 5.4% yield, based on a weighted approach that includes forward net asset value, discounted cash flow analysis, and a targeted 15x multiple of fiscal year 2027 AFFO estimates. According to InvestingPro’s Fair Value analysis, the stock appears slightly overvalued at current levels, with additional insights available in the comprehensive Pro Research Report.

Evercore cites several risks to its outlook, including portfolio composition despite reduced exposure to cyclical tenants, potential pressure on AFFO growth if investment yield spreads erode, and whether the actual impact of data analytics capabilities and the private capital platform will match investor expectations. The company’s current ratio of 1.5 indicates healthy liquidity to manage near-term obligations, while its beta of 0.78 suggests lower volatility compared to the broader market.

In other recent news, Realty Income Corporation has announced the pricing of a public offering of $800 million in senior unsecured notes. The offering is divided into two equal tranches, with $400 million of 3.95% notes due in 2029 and $400 million of 4.50% notes due in 2033. This move follows Stifel’s reiteration of a Buy rating on Realty Income, maintaining a $68.00 price target, emphasizing the company’s liquidity position and the recent dual-tranche senior notes offering. UBS also reiterated its Buy rating with a $66.00 price target, citing the company’s expanding acquisition opportunities in Europe and a favorable credit loss outlook. Cantor Fitzgerald initiated coverage on Realty Income with a Neutral rating and a $64.00 price target, reflecting a potential 6.1% upside. These ratings and price targets highlight Realty Income’s strategic financial maneuvers and its potential growth in European markets. The company’s financial activities, including the senior notes offering, are part of its broader strategy to leverage opportunities and strengthen its financial standing.

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