On Friday, UBS began coverage on Essential Properties Realty Trust (NYSE:EPRT), assigning a Buy rating to the stock with a price target of $30.00. The firm's outlook on EPRT is based on the anticipation of significant acquisition opportunities that are expected to yield considerable growth in adjusted funds from operations (AFFO) in 2024 and 2025.
The company's focus on master leases is seen as a protective measure against bankruptcy risk, and its service/experience-oriented tenant base is likely to benefit from a normalization in consumer spending post-pandemic. These factors are projected to contribute to an AFFO growth rate that surpasses that of its peers, with a forecast of 7.8% growth for EPRT compared to the 2.5% average among peers.
UBS's coverage notes EPRT's ability to continue its external growth strategy amidst a challenging macroeconomic environment. The firm estimates that EPRT will acquire $1 billion in properties in 2024, matching its 2023 acquisition level, and will purchase an additional $902 million in 2025, with capitalization rates at 8.0%.
Despite EPRT's valuation being higher relative to its Triple Net peers—14% above compared to the five-year average discount of -1%—UBS believes that the premium is justified.
InvestingPro Insights
As UBS initiates coverage on Essential Properties Realty Trust (NYSE:EPRT) with a positive outlook, real-time data from InvestingPro reinforces the company's strong performance metrics. Essential Properties boasts a robust revenue growth of 26.44% over the last twelve months as of Q1 2024, showcasing its ability to expand its financial base. Furthermore, the company's P/E ratio stands at 21.46, indicating investor confidence in its earnings potential.
InvestingPro Tips highlight that Essential Properties has not only raised its dividend for six consecutive years but also trades near its 52-week high, reflecting a stable and potentially rewarding investment for dividend-seeking shareholders. Additionally, analysts have revised their earnings upwards for the upcoming period, suggesting optimism about the company's future profitability, which is also predicted for this year.
For readers looking to delve deeper into Essential Properties' financials and strategic outlook, more InvestingPro Tips are available, offering a comprehensive analysis of the company's performance and future prospects. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover the full suite of insights and analytics that InvestingPro has to offer.
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