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Investing.com - Goldman Sachs downgraded Mid-America Apartment Communities (NYSE:MAA) from Buy to Neutral, citing concerns about elevated rent growth expectations in the coming quarters. The company, currently trading at $151.10, appears overvalued according to InvestingPro models, with a P/E ratio of 31.4x and PEG ratio of 41.8x suggesting rich valuations.
The investment bank now forecasts funds from operations (FFO) at 0.5% below consensus for 2025 and 2% below for 2026, according to a research note released ahead of second-quarter earnings, scheduled for July 30. Despite valuation concerns, MAA maintains strong fundamentals with a 4% dividend yield and a 32-year streak of consistent dividend payments.
Goldman Sachs observed that while demand in sunbelt markets is now outpacing supply, significant vacancy levels remain and will need to be worked through before pricing power improves for apartment owners like MAA. The company maintains a "GOOD" overall financial health score according to InvestingPro, which offers comprehensive analysis through its Pro Research Report, available for over 1,400 US stocks.
The firm’s analysis of real-time rent growth data indicates that new lease rent growth peaked earlier than typical in several key markets including Washington DC, Houston, Los Angeles, and Boston, though it continues to accelerate in San Francisco.
For the broader single-family rental (SFR) market, Goldman Sachs noted that Census build-to-rent starts declined in the fourth quarter of 2024 and remained subdued in the first quarter of 2025, which could positively impact second-half 2025 deliveries.
In other recent news, Mid-America Apartment Communities reported its first-quarter financial results for 2025, with Core Funds From Operations (FFO) of $2.20 per share, slightly surpassing the consensus estimate of $2.16. Despite this positive outcome, the company decided to maintain its full-year 2025 guidance, citing uncertainties related to economic impacts. Additionally, MAA declared a quarterly dividend of $1.5150 per share, marking its 126th consecutive quarterly cash dividend, to be paid on July 31, 2025. Analysts from JMP Securities raised their price target for MAA to $170, maintaining a Market Outperform rating, while Truist Securities slightly lowered their target to $171 but reaffirmed a Buy rating. Both firms highlighted MAA’s strong performance within the real estate investment trust sector. Goldman Sachs recently added MAA to its US Conviction List, reflecting confidence in the company’s potential to generate strong returns. The company’s future performance is expected to benefit from a significant reduction in new construction deliveries and positive trends in new lease rates. Investors are advised to consider these developments when evaluating MAA’s potential in the market.
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