American Homes 4 Rent, Invitations Homes initiated at Buy at Jefferies (NYSE: AMH)

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Jefferies analyst Linda Tsai initiated coverage of single-family home rental firms American Homes 4 Rent (NYSE: AMH) and Invitation Homes (INVH), with Buy ratings on Wednesday, saying both have a “long runway for growth” as they’re in an early stage of share consolidation in a fragmented market.

“Short housing supply + spiking home prices + high demand” leads to “SFH rental wins,” Tsai wrote in a note to clients.

About 50% of American Homes 4 Rent’s (AMH) annual inventory additions “are built ground-up vs. just 1% of its new inventory in 2017, offering AMH higher return potential (+100 bps) versus traditional acquisitions (+ 4.75% cap rate), “the analyst wrote.

Invitation Homes (INVH), which acquires higher-end homes, “can increase SS revenue by an average of + 5.6% through FY 2024, from gains in rental growth & ancillary income,” she said.

Tsai’s Buy rating on American Homes 4 Rent (AMH) is more optimistic than the Quant rating of Hold and agrees with the average Wall Street rating of Buy. The Quant rating also puts Invitation Homes (INVH) at Hold, while the average Wall Street rating is a Buy.

See why SA contributor Philip Eric Jones calls Invitation Homes (INVH) a FROG.

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