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BTIG analyst Michael Gorman downgraded Invitation Homes (NYSE:INVH) stock to Neutral from Buy on Thursday due to a number of concerning factors impacting growth, such as potential near-term challenges facing the core markets it serves.
The single-family residential REIT’s portfolio is heavily concentrated in Florida and California — two markets that are seeing greater cost pressures and uncertainty given insurance hurdles and higher property taxes.
For other adverse factors, Gorman said, the strength and lack of inventory in the housing market makes external growth for INVH tougher. He added that the broader SFR sector has outperformed the apartment space markedly this year, bringing relative valuations to above historical averages.
“Within this environment, we think that a potential slowdown in fundamental results, external growth challenges, and legal risks could provide a headwind to shares and even lead to more divergence in relative valuations within the SFR group,” Gorman contended.
