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On Friday, Morgan Stanley (NYSE:MS) analyst Adam Kramer upgraded American Homes 4 Rent (NYSE:AMH) stock rating from Equalweight to Overweight and increased the price target to $40.00, up from the previous $39.00. The upgrade reflects the firm's confidence in the company's potential for earnings growth and its competitive position within the real estate investment trust (REIT) sector. Currently trading at $34.63, the stock sits near its 52-week low of $33.75, while maintaining a solid dividend yield of 3% with impressive dividend growth of 18.18% over the last twelve months.
Kramer highlighted that American Homes 4 Rent is expected to see earnings growth of 4% in 2025, and 8% in both 2026 and 2027. These projections place the company on par with the highest-growing apartment REITs and ahead of Invitation Homes (NYSE:INVH). The analyst noted the company's proven, steady development platform as a key factor in this anticipated performance. According to InvestingPro, the company maintains a GOOD financial health score of 2.8, with liquid assets exceeding short-term obligations.
The valuation of American Homes 4 Rent appears attractive when compared to other REITs and apartments, especially considering its performance lag in 2024 and year-to-date. Morgan Stanley's price target is based on a 20x multiple, which represents a 16% premium over the REIT sector. This premium is roughly aligned with the company's long-range average premium.
Kramer's assessment suggests that American Homes 4 Rent's above-average growth forecast for 2025 and the expected 8% growth in the following two years justify at least the historical premium the company has commanded. This positive outlook is underpinned by the company's steady track record and its standing relative to the broader market and historical valuations.
In other recent news, American Homes 4 Rent appointed Bryan Smith as CEO and expanded its board, following the retirement of the former CEO, David P. Singelyn. The company also issued $500 million in senior unsecured notes, adding to its total debt position of $4.53 billion. Notably, Evercore ISI upgraded the company's status from "In Line" to "Outperform," indicating a potential return of approximately 16%, while Keefe, Bruyette & Woods adjusted the company's price target to $38 from $39, maintaining a Market Perform rating.
The real estate investment trust reported a 4.4% increase in year-over-year revenue and a 5.4% boost in core net operating income. American Homes 4 Rent also reported net income of $73.8 million and revised its 2024 guidance to include core funds from operations of $1.77 per share.
The appointment of Bryan Smith and the expansion of the board were documented in an 8-K filing with the Securities and Exchange Commission. These are recent developments in the company's ongoing operations.
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