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On Monday, Goldman Sachs adjusted its price target for American Homes 4 Rent (NYSE:AMH), a $15.77 billion market cap residential REIT currently trading at $37.47, reducing it to $42.00 from the previous $44.00, while reaffirming a Buy rating on the stock. According to InvestingPro analysis, the company has maintained dividend payments for 13 consecutive years, with a current yield of 3.24%. The adjustment follows the company’s fourth-quarter results for 2024 and its guidance for 2025. Analysts at Goldman Sachs revised their estimates to account for the reported financials and the anticipated rent growth in the coming years.
The company’s fourth-quarter performance was largely in line with Goldman Sachs’ projections, with same-store revenue growth slightly exceeding expectations and overall revenue growth reaching 6.47% in the last twelve months. However, this was balanced by an increase in same-store expenses. InvestingPro data reveals the company maintains strong financial health with a current ratio of 2.15, indicating robust liquidity management. The updated estimates incorporate the impact of these results and the guidance provided for 2025, which includes moderately lower expectations for future rent growth.
During the earnings call, management provided a preliminary update for January, highlighting a 0.2% sequential increase in occupancy to 95.6%. This focus on occupancy was a key point of interest for the fourth quarter of 2024. Additionally, new lease rates saw an uptick of 0.7% in January. Renewal growth was reported at 4.5% for the same month, leading to a blended rate growth of 3.3%, which was consistent with the fourth quarter of 2024.
The valuation and price target revision are based on a lowered forward-looking FFO (funds from operations) multiple. Goldman Sachs now applies a target FFO multiple of 22.0 times for the fifth through eighth quarters in the future, down from the previous 22.6 times. InvestingPro analysis indicates the stock is currently trading at a high P/E ratio of 34.69, suggesting potential overvaluation relative to the market. For deeper insights into AMH’s valuation metrics and additional ProTips, subscribers can access the comprehensive Pro Research Report available on the platform. This change reflects the updated FFO estimates and the recalibrated relationship between FFO growth rates and FFO multiples as stated by the analysts.
In other recent news, American Homes 4 Rent reported its fourth-quarter 2024 earnings, with an earnings per share (EPS) of $0.33, significantly surpassing the forecasted $0.16. However, the company’s revenue was slightly below expectations, totaling $436.6 million compared to the anticipated $441.81 million. Despite this, the company achieved a 6.6% growth in core funds from operations (FFO) per share, and full-year net income reached $398.5 million. In a separate development, JMP Securities upgraded American Homes 4 Rent’s stock rating from Market Perform to Market Outperform, setting a new price target of $41.00. The upgrade was attributed to the company’s reported core FFO of $0.45 per share, which met both JMP’s and consensus estimates, and the observed increase in Net Operating Income (NOI). For 2025, American Homes 4 Rent provided guidance with core FFO per share expected to be between $1.80 and $1.86, and the company plans to deliver approximately 2,300 homes. The company also anticipates a same-home core revenue growth of 3.5% at the midpoint, aiming for an occupancy rate in the low 96% range. CEO Brian Smith expressed optimism about the company’s future, highlighting its commitment to addressing the nation’s housing shortage.
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