What happened
Shares of Camden Property Trust (CPT +3.21%) rose 10.1% in January, according to data provided by S&P Global Market Intelligence. While the stock market rally last month helped drive some of that surge, analysts also contributed to the apartment REIT's strong showing to start the year.
So what
A couple of analysts updated their view on Camden Property last month. While Deutsche Bank analyst Derek Johnston reduced the bank's price target on the REIT's stock from $153 to $140 per share, that still implies more than 10% upside from the recent price. Further, they kept their buy rating.
The analyst reduced their target because of their cautious view on REITs this year due to more tepid leasing conditions. That could weigh on earnings growth for Camden this year.
NYSE: CPT
Key Data Points
Meanwhile, Mizuho analyst Haendel St. Juste upgraded Camden Properties from neutral to buy while increasing their price target from $119 to $125 per share (right around the current level). The analyst believes that Camden offers one of the best risk/reward profiles in the apartment sector for 2023. They see an attractive valuation and better funds from operations (FFO) growth for the company this year.
The analyst pointed out that Camden trades at a discount to peer Mid-America Apartment Communities (MAA +3.93%) when it typically trades at a premium. That makes it relatively attractive, given their view that Camden will grow its FFO by 9.4% this year, while MMA will grow by 7.9%.
However, Camden Property Trust expects to grow slower. The REIT reported its fourth-quarter results and provided its 2023 outlook in early February. The company anticipates growing FFO per share by about 4% at the midpoint of its guidance range.
While it sees same-store net operating income growing by 5% and incremental growth from recently completed acquisitions and development projects, the company expects headwinds from higher interest rates and other factors slowing its growth rate. For comparison, MAA sees its core FFO growing by about 6.8% per share this year. On a more positive note, Camden did increase its dividend by another 6.4%.
Now what
Even with last month's rally, shares of Camden Property Trust have lost about a quarter of their value in the past year. Because of that, it continues to trade at an attractive price, given its long-term growth prospects. While it's facing some growth headwinds this year, the REIT's focus on owning apartments in the fastest-growing metro areas across the South positions it to continue growing FFO and its dividend at attractive rates in the future.
