June 22, 2022- American Tower Corporation (NYSE:AMT) and CubeSmart (NYSE:CUBE)
Two recent analyst upgrades have these REITs looking like the best stocks to buy now.
Bear market rally or a reversal? Markets staged a desperately needed surge following last week’s carnage. The Dow Jones closed over 640 points, or 2.15%, the S&P 500 gained 2.4%, and the Nasdaq rose 2.5%. Yet the negative catalysts remain. With substantial dividends and stable cash flows, REITs are a shrewd place to look. Two prominent REITs, American Tower Corporation (NYSE:AMT) and CubeSmart (NYSE:CUBE) stand as some of the best stocks to buy now.
Real Estate Investment Trusts (REITs) provide consistent yields during uncertain times. As REITs are legally required to distribute 90% of their taxable income as dividends, they offer some of the best dividends in the market. They also add easy, efficient, and convenient real estate exposure without buying physical assets.
American Tower Corporation is one of the best stocks to buy now because it is one of the world’s largest REITs. It focuses explicitly on communications sites, which, last we checked, will always see demand. With a portfolio of approximately 219,000 sites, AMT is nothing short of a behemoth. Recent upgrades from JPMorgan and Bank of America certainly help its cause.
Then there’s CubeSmart, a top three owner and operator of self-storage properties in the U.S. As a self-administered and self-managed REIT, CUBE is an innovative way to invest in storage and logistics demand with all of our supply chain issues. Like AMT, it’s also received several analyst upgrades lately, including Bank of America and Raymond James.
But it goes deeper than price target hikes or upgraded coverage. AMT and CUBE are industry leaders perfectly positioned to weather this storm. Here is why both are the best stocks to buy now.
American Tower Corporation (NYSE:AMT)
Bank of America initiated coverage, giving this REIT a 27.61% upside.
We mentioned earlier the benefits of REITs during trying times and the size and scope of American Tower.
Although it’s had an up and down 2022 and sits nearly -16.15% below its highs, several indicators make it one of our best stocks to buy now.
AMT’s Q1 Earnings and Revenue Beat Marked Impressive Year-Over-Year Growth
AMT will not report its Q2 earnings for another month or so. But judging from what it did last quarter and its potential 5-year revenue CAGR of 10.1%, it could be substantial.
In Q1, the Company beat both top and bottom-line estimates. EPS came in at $1.56 while revenue did so at $2.66B. This compares to consensus estimates of $1.11 EPS and revenue of $2.6B.
Moreover, several of the Company’s Q1 highlights marked significant year-over-year increases, including:
- Total revenue by 23.2% and property revenue by 22.1%
- Net income by 7.7%
- Adjusted EBITDA by 12.8%
- Consolidated AFFO by 7.0%
- Net income attributable to AMT common stockholders by 10.3%
- AFFO attributable to AMT common stockholders by 6.1%
AMT’s Fundamentals are Industry-leading
Don’t be fooled by the AMT stock chart. This is a REIT juggernaut with the margins and dividend to match.
First, a deeper dive into several of its margins make its industry-leadership evident as one of the best stocks to buy now.
Consider its 70.5% gross margin. This is an outstanding figure and shows that the Company’s profits take up a big chunk of its revenue. Moreover, this figure is nearly 8% above the industry average and higher than many competitors.
Source: Finbox
Next, consider its 57.0% ROCE. This indicates that AMT is generating a sizable return from the book value of its equity. Moreover, this sits over 50% higher than the industry average and crushes that of many peers.
Source: Finbox
Lastly, its 34.8% operating margin shows the Company is making good use of its operating income. This also sits more than double the industry average.
Source: Finbox
AMT’s Dividend is the Real Story
AMT currently has a 2.4% dividend yield. Which isn’t anything to scoff at. Yet it’s the dividend’s growth potential, though, that intrigues investors.
AMT has hiked its dividend for 10 consecutive years, a figure nearly 900% higher than the industry average. Based on the Company’s history, 15.3% dividend growth projections at a 19.1% 5-year CAGR are very feasible.
At This Level, Analysts See AMT as a Strong Buy
American Tower is trading near 52-week lows and bubbling to breakout with considerable analyst upside. On Tuesday (June 21, 2022), analysts at JPMorgan upgraded the stock from UNDERWEIGHT to OVERWEIGHT and hiked their price target from $245.00 to $285.00.
This comes roughly two weeks after Bank of America initiated a street-high price target with a BUY rating at $315.00. This represents a 27.61% upside from June 21, 2022’s $246.85 close.
6 Wall Street analysts in total, over the last 3 months, offered a 12-month price target for AMT. Tipranks rates the stock a STRONG BUY because out of these 6 analysts, 5 rated it a BUY compared to just 1 HOLD and 0 SELL. As mentioned, BoA has a street-high price target of $315.00. AMT’s low sits at $268.00, while its average of $287.60 represents a 16.51% upside from $246.85.
AMT’s year-to-date low and high are $217.53 and $294.40, respectively.
CubeSmart (NYSE:CUBE)
Evercore’s recent street-high price target gives this self-storage play a 43.21% upside.
Look no further if you’re looking for the benefits of a REIT while thinking outside the box. CubeSmart is one of the best stocks to buy now.
CubeSmart has a portfolio of affordable, easily accessible, and secure self-storage spaces for residential and commercial customers. It’s a top-three owner and operator of American self-storage properties.
Moreover, it is at the forefront of a booming real estate sector.
Globally, the self-storage market was valued at $48.02 billion in 2020 and is expected to reach $64.71 billion by 2026 at a 5.45% CAGR. Much of this is due to long-term demographic trends that won’t dissipate soon. Trends such as growth in urbanization and COVID-19 pushing business owners toward self-storage as a way to cut costs.
CubeSmart is the ultimate way to play this for the following reasons.
CubeSmart’s Latest Earnings Missed Estimates But Pointed Towards Outstanding Growth Trends
Although CUBE’s Q1 2022 earnings and revenue missed estimates, it saw a continuation of positive trends from 2021. These trends could persist in the second half of the year as well.
- Quarterly revenue increased 26.3% year-over-year
- Adjusted funds from operations (“FFO”) per share came in at $0.58 and marked a 23.4% year-over-year increase
- Same-store (523 stores) net operating income (“NOI”) increased 21.4% year-over-year. 15.6% revenue growth and a 2.9% increase in property operating expenses contributed.
- Quarterly same-store occupancy averaged 93.6% and closed at 94.1%.
Based on this earnings report and Finbox data, it shouldn’t be surprising to see CUBE’s revenue grow at a 10.2% 5-year CAGR.
Near 52-Week Lows and -29.37% Below Its Highs, CUBE Offers Outstanding Fundamentals at a Discount
CUBE currently trades around its 52-Week lows and roughly -29.37% below its 2022 high of $57.34.
It is an ugly chart, no doubt. However, CUBE’s margins signal a company ready to breakout with strong profits, operating income, and equity.
Even for a REIT, CUBE’s Dividend Track Record is Amazing
CUBE’s fundamentals should allow management to continue its dividend consistency. Real Estate already is one of the best sectors to find dividends in, as we know. But even compared to industry averages, CUBE stands alone. It has 12 consecutive years of dividend growth and 17 consecutive years of dividend payments. These figures are 1,100.00% and 54.55% above the industry average.
CUBE’s 4.2% dividend yield is robust. Based on its track record, investors could see this payout grow another 26.5% at a 9.8% 5-year CAGR.
Recent Analyst Activity Points to a Mounting Upside for Cube
Despite the stock’s performance over the last three months, recent analyst activity shows CUBE as one of the best stocks to buy now. This week alone, Bank of America Co. and Evercore analysts upgraded coverage. BoA upgraded the stock from NEUTRAL to BUY, while Evercore set a street-high $58.00 price target.
Evercore’s coverage gives the stock a potential upside of 43.21% from June 21, 2022’s closing price of $40.50.
This comes nearly a month after Jonathan Hughes at Raymond James upgraded the stock from OUTPERFORM to STRONG BUY.
Over the last 3 months, 6 Wall Street analysts offered 12-month price targets for Cubesmart. CUBE’s average price target currently sits at $53.75, representing a 32.72% upside from $40.50. Evercore’s $58.00 price target is a street-high, as mentioned, while CUBE’s low is $48.00.
CUBE’s year-to-date low and high are $38.67 and $57.34, respectively.
