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Investing.com - Truist Securities upgraded AvalonBay Communities (NYSE:AVB) from Hold to Buy while lowering its price target to $218.00 from $224.00. The $27.4 billion market cap residential REIT currently trades at $192.64, with InvestingPro analysis indicating the stock is currently overvalued.
The upgrade comes as AVB has become the second-worst performing stock in Truist’s nine-company apartment REIT coverage universe year-to-date and over the past 12 months, with a -10.94% YTD return, creating what the firm calls an opportunity to acquire shares at a material discount to fair value. Despite recent performance, the company maintains a strong GOOD Financial Health Score on InvestingPro and has maintained dividend payments for 32 consecutive years, currently yielding 3.63%.
Truist noted that AvalonBay has rarely traded at a forward FFO multiple as low as today’s 16.9x, suggesting the current valuation represents an attractive entry point for the apartment REIT.
The firm projects 5.4% NFFO growth for AvalonBay next year and estimates the company has the third most attractive five-year NFFO PEG ratio and second most attractive five-year FAD PEG ratio in its peer group.
Truist also highlighted AvalonBay’s strong balance sheet with Net D/EBITDA at only 4.4x as of Q2 (4.6x on a forward basis) and believes the 5.9% implied cap rate reflects a material discount to NAV.
In other recent news, AvalonBay Communities reported its second-quarter 2025 earnings, showcasing a significant earnings per share (EPS) beat. The company achieved an EPS of $1.88, surpassing the forecast of $1.20, representing a 56.67% surprise. However, the revenue did not meet expectations, totaling $689.9 million compared to the projected $757.59 million, marking an 8.93% shortfall. In terms of analyst actions, Morgan Stanley upgraded AvalonBay from Equalweight to Overweight, citing improved earnings growth prospects despite a slight reduction in the price target to $225.00. Meanwhile, Mizuho downgraded AvalonBay from Outperform to Neutral, lowering the price target to $199.00 due to anticipated growth challenges, particularly in its Los Angeles portfolio and potential risks in other major markets. These developments highlight mixed sentiments from analysts regarding AvalonBay’s future performance.
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