Persistently elevated inflation and sharply rising interest rates have investors concerned about 1970s-era stagflation returning in 2023. The last time…
Persistently elevated inflation and sharply rising interest rates have investors concerned about 1970s-era stagflation returning in 2023. The last time stagflation was a problem, real estate was a top-performing sector in the market. Buying physical property can be difficult and expensive, but investors can easily invest in real estate by buying shares of real estate investment trusts, or REITs. There are many types of REITs, and most of them pay sizable dividends and serve as reliable sources of income.
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Here are eight of the best real estate stocks to buy in 2022, according to CFRA Research analysts:
|Stock||Implied upside over March 10 closing price|
|Prologis Inc. (ticker: PLD)||18.8%|
|American Tower Corp. (AMT)||20.2%|
|Equinix Inc. (EQIX)||18.4%|
|Public Storage (PSA)||19%|
|Realty Income Corp. (O)||17.3%|
|Welltower Inc. (WELL)||20.9%|
|Alexandria Real Estate Equities Inc. (ARE)||42%|
|Mid-America Apartment Communities Inc. (MAA)||24.1%|
Prologis Inc. (PLD)
Prologis is an industrial REIT that specializes in logistics real estate. Analyst Michael Elliott says there is strong demand and limited competition for the company’s logistics centers. Elliott says Prologis’ real estate holdings in key markets where land is scarce are a tremendous source of value and a differentiating factor for investors. New logistics center supply is coming online in 2023, but Elliott says Prologis should maintain pricing power and grow revenue by at least 38% this year. The company’s $4 billion in liquidity also provides financial flexibility. CFRA has a “strong buy” rating and $139 price target for PLD stock.
American Tower Corp. (AMT)
American Tower is a specialized REIT that operates the world’s largest independent portfolio of wireless communications and broadcast towers. Shares are down 9.7% this year through March 10, making it the worst-performing stock on this list. Elliott thinks the share-price weakness is a buying opportunity, and concerns over foreign exchange headwinds, supply chain risks and acquisition integration have already been priced into the stock. He says mobile video consumption, wireless spectrum build-outs and unlimited data plans will support American Tower’s demand. Elliott projects 3% to 5% revenue growth in 2023. CFRA has a “buy” rating and $230 price target for AMT stock.
Equinix Inc. (EQIX)
Equinix is a specialized REIT and is the world’s largest data center operator. Elliott says Equinix has a unique, global growth opportunity and its highly recurring revenue base generates financial visibility and stability for investors. Equinix has valuable partnerships with some of the biggest technology companies in the world. Elliott says the company’s Equinix Metal service has positive momentum heading into what will likely be another strong growth year in 2023, as enterprise customers seek hybrid cloud opportunities. He projects 11% to 13% revenue growth this year. CFRA has a “buy” rating and $788 price target for EQIX stock.
Public Storage (PSA)
Public Storage is the largest owner of self-storage facilities in the U.S. Elliott says the self-storage industry has positive fundamental trends, and Public Storage is well positioned to capitalize on the opportunities. He says the company has a diverse, high-quality portfolio and a runway to further increase rental rates without bringing down historically high occupancy levels. With $800 million in cash on its balance sheet, Elliott says acquisitions are always a possibility. He projects 6% to 8% revenue growth for Public Storage in 2023. CFRA has a “buy” rating and $335 price target for PSA stock.
Realty Income Corp. (O)
Realty Income is a retail REIT with a focus on single-tenant buildings. Elliott says Realty Income is more insulated from the shaky brick-and-mortar retail environment than many of its peers, as the majority of its tenants are non-discretionary or service-oriented businesses. In addition, Realty income has a long history of high occupancy rates and growing dividend payouts. CFRA has a “buy” rating and $72 price target for O stock.
Welltower Inc. (WELL)
Welltower is a health care REIT that invests in health care facilities, including senior housing, specialty care facilities and medical office buildings. Elliott says improving occupancy rates and pricing power will generate upside for Welltower. Pandemic-related risks are subsiding, reducing the possibility of disruptions associated with additional variants. In the long term, Elliott says senior housing REITs will benefit from growing demand from an aging U.S. population. CFRA has a “buy” rating and $82 price target for WELL stock.
Alexandria Real Estate Equities Inc. (ARE)
Alexandria Real Estate Equities owns properties containing office and laboratory space for the life sciences industry. Analyst Kenneth Leon anticipates elevated secular growth in life sciences real estate demand, which is a recession-resistant industry. While Alexandria is exposed to risks associated with its startup biotech tenants, Leon says the company’s diversified tenant base and high mix of investment-grade and publicly traded, large-cap tenants help mitigate that risk. In addition, many of these high-quality tenants have long-duration leases that provide financial visibility. Leon projects 13.3% revenue growth in 2023. CFRA has a “buy” rating and $180 price target for ARE stock.
Mid-America Apartment Communities Inc. (MAA)
Mid-America Apartment Communities is a residential REIT that specializes in large, multifamily properties located in large and secondary cities in the U.S. Sun Belt region. Leon says that because the Sun Belt is generating strong job and population growth and robust rental demand, the region is appealing to renters looking to escape expensive coastal markets. He projects Mid-America will outpace its peers in cash net operating income growth in 2023, while occupancy levels are expected to remain at or above 2022 levels of 95.6%. CFRA has a “strong buy” rating and $185 price target for MAA stock.
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8 Best Real Estate Stocks to Buy originally appeared on usnews.com
Update 03/13/23: This story was previously published at an earlier date and has been updated with new information.