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On Thursday, KeyBanc made a major rating change to NetStreet Corporation (NYSE:NTST), upgrading the real estate investment trust from Underweight to Sector Weight. The analyst firm's revisions come as NetStraight prepares to release its financial results and follows the company's recent fundraising efforts.
The analyst cited several reasons for NetStreet's improved outlook. The Company's capital raising activities provided sufficient resources for investments throughout 2024. While immediate accretion from these investments may be limited, investment yields may increase due to lower borrowing costs. This could lead to further growth in the long term and further reduce Netstreit's cost of capital.
NetStrait's cost of capital has already seen significant improvement, with its stock price up 1.8% since the beginning of the year, now 720 basis points ahead of the TripleNet real estate investment trust (REIT) sector. The overall capital market environment was also favorable for us, with the second half of last year seeing significant interest rate declines.
With these developments, analysts believe Netstreit is now able to offer a more balanced risk-reward profile. The stock is expected to perform in line with its peers. Netstreit stock currently trades at 15x his 2024 adjusted funds from operating (AFFO) multiple, which represents a 15% premium compared to the net lease subsector. Additionally, the company's implied capitalization rate is 6.6%, which is 20 basis points lower than the average for the net lease subsector.
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