BTIG downgrades Equity Residential, Elme Communities as stocks trading at fair value

Colleen Michaels

BTIG on Wednesday downgraded Equity Residential (NYSE:EQR) and Elme Communities (NYSE:ELME) to Neutral from Buy as the stocks are currently trading at fair value.

Equity Residential (EQR) was downgraded on concerns about the recovery class A product in coastal markets. "We think investors are likely to continue having concerns over the class A product in coastal markets over the coming year, especially if economic weaknesses increase," analyst Michael Gorman said in a note.

He added that EQR trades within fair value at the current 15.1x multiple, representing 3% premium to apartment REITs.

Elme (ELME) was downgraded as it trades at 18.2x BTIG's 2023 FFO estimate, or 21% premium to apartment REITs. "While the company expanded its portfolio exposure to attractive Southeast markets, we think investors are likely to look to more established portfolios with more significant presence in these markets for exposure to Sunbelt mark-to-market upside," said Gorman.

BTIG believes Elme (ELME) is positioned for above-average FFO growth this year of ~12.5%, likely driven by strong same-store NOI growth and positive net investment of ~$150M in volume.

Wall Street analysts on average are bullish on Equity Residential (EQR), but SA Quant rates the stock Hold.

Meanwhile, Elme's (ELME) sell-side ratings are neutral, while SA Quant is bearish on the stock.