REIT stocks analysis: Realty Income, Simon Property, Starwood

Real Estate Investment Trusts (REITs) are underperforming the market this year as concerns about the economy and interest rate remain. The closely watched iShares Global REIT ETF (REET) stock has risen by just 2.4% while the Vanguard Real Estate Index Fund (VNQ) is up by just 3.30%.

Several important REITs will be in the spotlight next week as they publish their financial results. Some of the most notable ones to watch will be Realty Income (O), Simon Property Group (SPG), and Starwood Property (STWD).

Simon Property Group | SPG

Simon Property Group chart by TradingView

Simon Property Trust is one of the biggest REITs in the United States with a market cap of over $57 billion. It is a well-known brand since it is the biggest mall landlord in the United States where it owns 93 of them. It also investors in 69 premium outlets, 14 mills, and six lifestyle centers.

In the past decade, Simon Property Group has gone through challenges as concerns about the future of shopping malls continued. The biggest concern was that malls would not survive the e-commerce craze. However, as I wrote in 2023, malls have survived and thrived, with Simon’s annual revenues being north of $5 billion. Simon’s occupancy rate has been north of 95%.

Simon Property Trust will be in the spotlight next week as it publishes its financial results. In the first quarter, the company’s net income rose to $731 million while its Funds From Operations (FFO) rising to $1.33 billion. 

The average estimate by analysts is that Simon’s revenue will come in at $1.3 billion, a 3.80% increase from the same period in 2023. For the year, the estimate is that it will make $5.2 billion. Simon also pays a good 5.2% dividend.

On the daily chart above, we see that the SPG share price has been in a slow upside in the past few weeks. It has remained above the 50-day and 100-day Exponential Moving Averages (EMA). Most notably, it has formed a rising wedge pattern, pointing to a potential retreat after earnings. If this happens, it could drop to about $145.

Realty Income | O

Realty Income stock price defied gravity this week as it jumped to $60 as Wall Street imploded. This rally was in line with my last forecast, where I cited its formation of a bullish pennant chart pattern.

Realty Income stock jumped after the weak US jobs numbers because they implied that the Federal Reserve will start cutting interest rates as soon as in September.

Looking ahead, the company will publish its results on August 5. Analysts expect that its revenue will come in at $1.21 billion, flat from the first quarter and higher than the $995 million it made in Q2’23. This increase will be because the company acquired Spirit Realty in that period.

Realty Income stock has now jumped above the upper side of the bullish pennant pattern. It has also moved above the key resistance point at $57.85, its highest point in January 2024. Also, the stock formed a golden cross pattern as the 50-day and 200-day Exponential Moving Averages crossed each other. 

Therefore, the stock could continue rising as buyers target the key point at $60.25, its highest point in July 2023.

Starwood Property Trust | STWD

Starwood Property Trust chart by TradingView

I wrote about Starwood Property Trust in May and expressed optimism about its stock, predicting that it would rise to $25. In another note, I had some concerns about its Starwood Real Estate Income Trust (SREIT), which had suspended withdrawals.

Starwood Property Trust stock has had a rough patch this year, falling by 8% and underperforming the broader market. 

The most recent first quarter results showed that STWD’s total revenue came in at over $523 million, most of it from the commercial and residential lending segment, which made over $430 million. Its net income was $159 million. 

Analysts expect these earnings to show that its revenue retreated to $505 million from Q1’s $523 million and $515 million from what it made in 2023.

Most investors love STWD for its strong dividends since it has a yield of almost 10%, higher than most companies in the industry.

Looking at the daily chart, we see that the Starwood Property Trust stock price rose to $20.62 in July and has now pulled back to $19.50. It has remained slightly above the 50-day and 200-day moving averages. 

STWD stock has not formed any defined chart pattern. Therefore, the outlook is neutral, with the key support and resistance points to watch being at $18.50 and $20.60. The average estimate among analysts is $21.93, slightly above the current $19.50. Some of the most notable bullish analysts on the stock are from JPMorgan, Raymond James, and BTIG.

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