BofA raises Acadia Realty Trust stock to Buy, lifts price target

On Friday, BofA Securities issued an upgrade for Acadia Realty Trust (NYSE: NYSE:AKR), shifting its rating from Neutral to Buy and increasing its price target to $20.00 from the prior $18.00. The adjustment is based on several key factors that position the company for potential growth.

The firm identifies Acadia Realty's leading prospects for internal growth within its sector and points to near-term opportunities for external expansion. These opportunities are partly due to reduced competition in Street retail, where Acadia has a deal pipeline valued at several hundred million dollars.

The firm also sees potential upside to the company's 2024 guidance, as Street retail assets, including those in slower markets like Chicago, are recovering. Another contributing factor to the optimistic outlook is the lower capital expenditures required for Street leases, which are expected to result in leading growth for adjusted funds from operations (AFFO) in its sector.

In addition to the rating upgrade and price target hike, BofA Securities has adjusted its valuation approach for Acadia Realty. The firm is now applying a 10% premium to its one-year forward net asset value (NAV) estimate for the company, up from the previous 0% premium.

This change reflects the firm's confidence in Acadia's improved earnings visibility and strong balance sheet. The capitalization rate used in their analysis remains unchanged at 6.1%.

The revised assessment by BofA Securities suggests a more bullish outlook on Acadia Realty Trust's financial performance and strategic positioning in the real estate market.

In light of BofA Securities' recent upgrade for Acadia Realty Trust, real-time data from InvestingPro provides additional context to the company's financial health and market performance. Acadia Realty Trust's adjusted market capitalization stands at approximately $1.76 billion, reflecting the scale of the company within the real estate sector. The firm's price-to-earnings (P/E) ratio, a key metric for valuation, is currently at a relatively high 82.63, which may be a point of consideration for investors looking at the company's earnings multiple. However, when adjusted for the last twelve months as of Q4 2023, the P/E ratio is significantly lower at 5.83, suggesting a more favorable earnings outlook in the near term.

The company's commitment to shareholder returns is evidenced by its track record of maintaining dividend payments for 26 consecutive years, with a current dividend yield of 4.41%. This consistency in returning value to shareholders could be a reassuring sign for long-term investors.

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InvestingPro Tips also highlight that Acadia Realty Trust is trading at a low price-to-earnings-growth (PEG) ratio of 0.6, indicating potential undervaluation relative to near-term earnings growth expectations. Additionally, analysts predict the company will be profitable this year, which is supported by the fact that the company has been profitable over the last twelve months.

For those considering an investment in Acadia Realty Trust, InvestingPro offers additional insights, with a total of 7 InvestingPro Tips available on their platform. Readers looking to delve deeper into the company's metrics can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at https://www.investing.com/pro/AKR. This comprehensive analysis could provide a more nuanced understanding of the company's financial standing and future prospects.

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