On Monday (NASDAQ:MNDY), Netstreit Corp. (NYSE: NTST) shares received an upgrade from Scotiabank (TSX:BNS), with the firm shifting its stance from Sector Perform to Sector Outperform. Accompanying this upgrade, the price target for the stock was also raised to $18.00 from the previous $16.00.
Scotiabank's decision to upgrade Netstreit's stock is based on a positive outlook, highlighting an attractive risk-reward profile for investors. The firm anticipates that Netstreit will experience above-average multi-year earnings growth when compared to its peers within the Net Lease Real Estate Investment Trust (REIT) sector.
The bank's analysts have projected a 2-year compound annual growth rate (CAGR) for adjusted funds from operations per share (AFFOPS) at 4.5% from 2024E to 2026E. This growth rate is slightly above the 4.2% weighted average for the group.
In addition to the growth expectations, Netstreit's current trading valuation was noted as attractive. The stock is trading at a -1.0x next twelve months price to adjusted funds from operations per share (NTM P/AFFOPS) discount, which is favorable when compared to the +1.3x three-year average premium of its peer group.
Scotiabank also emphasized Netstreit's solid investment grade exposure, which stands at 61%. This level of exposure suggests a strong credit quality of the assets within the company's portfolio, potentially offering a degree of financial stability and reducing investment risk.
In other recent news, NETSTREIT Corp. reported mixed results for the third quarter of 2024, revealing a net loss of $5.3 million, but also a 3% year-over-year increase in Core Funds From Operations (Core FFO) which reached $24.9 million.
Despite the net loss, the company maintains its guidance for the year. Gross investments for the quarter hit a record $152 million, and the company declared a quarterly cash dividend of $0.21 per share. Moreover, NETSTREIT plans to maintain an accretive acquisition spread and reduce tenant concentrations below 5%.
The company's portfolio, consisting of 671 leased properties, generated over 75% of annual base rent from investment-grade tenants. The firm's strategic focus on sale-leasebacks has led to an extended weighted-average lease term and a diversified tenant base. NETSTREIT also confirmed that rent payments from Big Lots (NYSE:BIG) are expected to resume in January 2024.
In the face of concerns about the impact of lower reimbursement rates on pharmacies and profitability challenges for tenants like pharmacies, NETSTREIT remains vigilant about tenant performance. The company also expressed confidence in the long-term productivity of its assets. These are the recent developments in NETSTREIT Corp.'s operations and financial performance.
InvestingPro Insights
Adding to Scotiabank's positive outlook on Netstreit Corp. (NYSE: NTST), recent data from InvestingPro provides further context to the company's financial position and growth prospects.
InvestingPro data shows that Netstreit's revenue growth remains strong, with a 26.69% increase over the last twelve months as of Q3 2024. This aligns with Scotiabank's projection of above-average earnings growth. The company's gross profit margin is impressive at 88.37%, indicating efficient operations and potentially supporting the anticipated AFFOPS growth.
Two key InvestingPro Tips support the optimistic view: First, analysts expect Netstreit's sales to grow this year, corroborating Scotiabank's growth projections. Second, the company's liquid assets exceed short-term obligations, suggesting a solid financial foundation that could support future growth initiatives.
It's worth noting that Netstreit offers a dividend yield of 5.2%, which may be attractive to income-focused investors. However, the company's profitability metrics present a mixed picture, with a negative return on assets of -0.23% over the last twelve months.
For investors seeking a more comprehensive analysis, InvestingPro offers 6 additional tips for Netstreit Corp., providing a deeper understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.