On Monday, Evercore ISI made a change to its rating for Invitation Homes (NYSE:INVH), downgrading the stock from Outperform to In Line and setting a new price target of $36.00.
The firm's adjustment comes after a period of strong performance by the company's stock, which has been the top performer in the residential sector since the beginning of 2024. Invitation Homes has outperformed its residential peers by 380 basis points and has exceeded the RMZ index by 530 basis points.
The stock's recent surge, with an 8.1% increase over the past 30 days, has made it the leading residential stock, surpassing AMH by 70 basis points. This rise has been attributed to a significant turnaround in its leasing statistics for the quarter to date and the positive market response to its new third-party management business.
Despite the favorable view of the single-family rental (SFR) space over apartments, due to factors such as a more stable renter base and limited new home construction, Evercore ISI suggests the current valuation offers less potential for further gains compared to other stocks in its coverage.
As of the previous Friday's market close, Invitation Homes was trading at an implied capitalization rate of 5.3%, compared to its historical average of 5.1%. The price-to-net asset value (P-NAV) ratio stood at 89%, aligning with its historical norm.
The firm also noted that with the Federal Reserve's anticipated rate cut now expected in June rather than March, and with fewer cuts forecasted for the year, the SFR sector's performance has been robust, posting a 7.9% gain over the last 30 days, second only to the RMZ's 1.9% increase.
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