UDR's (UDR) improving metrics suggest potential for higher same-store revenue, UBS said in a note emailed Thursday.
UBS expects the multifamily REIT's improving metrics to boost its shares, with rising rent growth pointing to a positive same-store revenue inflection in Q3, despite conservative H2 guidance.
"We believe UDR has a favorable risk/reward as it's generating a strong rent growth algorithm that is not priced into its discounted valuation," UBS said. It expects UDR to outperform as "Coastal" segment performs well, despite supply issues in the "Sunbelt" area, which makes up 25% of its portfolio.
UDR's third-quarter-to-date blended rent spreads at 2.1% is below 2.4% in July and Q2 total, but ahead of 1.6% in Q3 of last year, the brokerage said.
UBS raised its price target for UDR to $52 from $48 and maintained its buy rating, adding the rating reflects UDR's "increasing confidence in its rent growth trajectory along with a favorable valuation."
Price: 46.47, Change: +0.49, Percent Change: +1.05
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