Download PDF

1. Company Snapshot

1.a. Company Description

As of December 31, 2020, the Company owned or held a direct or indirect ownership interest in 291 apartment communities containing 86,025 apartment homes in 11 states and the District of Columbia, of which 18 communities were under development and one community was under redevelopment.The Company is an equity REIT in the business of developing, redeveloping, acquiring and managing apartment communities in leading metropolitan areas in New England, the New York/New Jersey Metro area, the Mid-Atlantic, the Pacific Northwest, and Northern and Southern California, as well as in the Company's expansion markets consisting of Southeast Florida and Denver, Colorado (the "Expansion Markets").

Show Full description

1.b. Last Insights on AVB

AvalonBay Communities' recent performance was negatively driven by development setbacks, including delayed occupancies and supply pressures, which offset the strength of its prime-market portfolio and robust balance sheet. Elevated interest costs also likely affected bottom-line gains, despite strong occupancy and rent growth.

1.c. Company Highlights

2. AvalonBay Communities' Q3 Earnings: A Closer Look

AvalonBay Communities' third-quarter 2025 earnings were below prior expectations, with actual EPS coming in at $2.75, relative to estimates of $2.81. The company's core FFO per share is now expected to be $11.25, down $0.14 from the previous outlook, reflecting a 2.2% year-over-year earnings growth. Same-store residential revenue growth is projected at 2.5%, with operating expense growth of 3.8%, resulting in same-store residential NOI growth of 2%. The company's revenue growth was impacted by softer apartment demand, attributed to reduced job growth, higher macroeconomic uncertainty, and lower consumer confidence.

Publication Date: Nov -02

📋 Highlights
  • Earnings Downgrade:: Core FFO per share revised to $11.25, reflecting a 2.2% year-over-year decline and $0.14 reduction from prior guidance.
  • Construction Pipeline:: $3 billion in projects under construction, targeting 6.2% yield on cost, with $1 billion in new starts planned for 2026 at 6.5%+ yields.
  • Balance Sheet Strength:: $3.2 billion in liquidity, 4.5x net debt/EBITDA leverage, and $150M in Q3 share repurchases at $193/share.
  • Regional Performance:: Mid-Atlantic and Southern California face challenges (e.g., L.A. entertainment sector impact), while established regions project 2.7% same-store revenue growth.
  • Supply-Demand Dynamics:: 2026 outlook benefits from 80 bps supply contraction in established markets and $2,500 affordability gap vs. for-sale housing.

Financial Performance

The company's financial performance was marked by a slight decline in EPS compared to estimates. The revenue growth was muted, with same-store residential revenue growth projected at 2.5%. The operating expense growth was higher at 3.8%, resulting in same-store residential NOI growth of 2%. The company's development activity is on track, with lease-ups performing better than initial expectations, and $3.2 billion in development underway, underwritten to a 6.2% yield on cost.

Valuation Metrics

Looking at the company's valuation metrics, the P/E Ratio stands at 21.32, indicating that the stock may be slightly overvalued. The P/B Ratio is 2.07, which is relatively reasonable. The EV/EBITDA ratio is 14.7, suggesting that the company's enterprise value is relatively high compared to its EBITDA. The Dividend Yield is 4.0%, which is attractive for income-seeking investors.

Market Outlook

The company expects its portfolio to perform relatively well in 2026 due to low new supply and unaffordable for-sale alternatives. New supply in established regions is expected to decline to 80 basis points of existing stock, and for-sale housing remains unaffordable, with costs $2,500 per month more than median apartment rents. The company's development pipeline is well-positioned, with a focus on high-growth areas and a shift towards suburban submarkets where development economics are more favorable.

Capital Allocation Strategy

The company's capital allocation strategy includes development starts in the mid-6s to high 6s, with buybacks around the mid-6s. The company has been nuanced in its market approach, focusing on specific submarkets and regions, and has adjusted its strategy to prioritize high-growth areas. The company's balance sheet is strong, with low leverage and over $3 billion in available liquidity, providing flexibility for future investments.

Guidance and Estimates

Analysts estimate next year's revenue growth at 4.5%, indicating a potential improvement in the company's financial performance. The company's guidance suggests that it is well-positioned for growth, with a strong development pipeline and a focus on high-growth areas. The company's expected same-store revenue growth of 2.5% for 2025 is driven by established regions, with a projected 2.7% growth.

3. NewsRoom

Card image cap

Here Are Thursday’s Top Wall Street Analyst Research Calls: AutoZone, BXP, Fiserv, Meta Platforms, PayPal, Salesforce, Toast and More

Dec -04

Source:

Card image cap

Doves Take The Wheel

Nov -30

Source: seekingalpha.com

Card image cap

A Fed Divided

Nov -23

Source: seekingalpha.com

Card image cap

Barings LLC Invests $1.34 Million in AvalonBay Communities, Inc. $AVB

Nov -23

Source: defenseworld.net

Card image cap

Bahl & Gaynor Inc. Makes New Investment in AvalonBay Communities, Inc. $AVB

Nov -22

Source: defenseworld.net

Card image cap

Avantax Advisory Services Inc. Has $2.68 Million Position in AvalonBay Communities, Inc. $AVB

Nov -21

Source: defenseworld.net

Card image cap

Hawks In The House

Nov -16

Source: seekingalpha.com

Card image cap

Winners And Losers Of REIT Earnings Season

Nov -14

Source: seekingalpha.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (6.29%)

6. Segments

Same Store

Expected Growth: 6.5%

Same-store growth at AvalonBay Communities, Inc. is driven by rent increases, occupancy gains, and operating efficiency improvements. A 6.5% growth rate suggests strong demand for apartments, effective pricing strategies, and controlled operating expenses. This performance indicates a stable and growing market with a competitive advantage in the multifamily housing sector.

Other Stabilized

Expected Growth: 5.8%

The 5.8% growth in Other Stabilized segment from AvalonBay Communities, Inc. is driven by a combination of factors including high occupancy rates, rent growth, and strategic acquisitions. The company's focus on urban markets with strong job growth and limited supply also contributes to the segment's stability and growth.

Development/Redevelopment

Expected Growth: 8.2%

AvalonBay's 8.2% growth is driven by development/redevelopment activities, fueled by a strong housing market, favorable demographics, and a focus on urban, walkable communities. The company's strategic land acquisitions, partnerships, and redevelopment of existing properties contribute to its growth, as it capitalizes on increasing demand for apartments and mixed-use developments.

Unallocated (Income) Loss from Investments in Unconsolidated Entities

Expected Growth: 0.0%

The 0.0% growth in Unallocated (Income) Loss from Investments in Unconsolidated Entities for AvalonBay Communities, Inc. suggests stability, likely driven by consistent equity method investment performance, minimal changes in investment portfolio composition, and steady cash distributions from unconsolidated entities, indicating no significant variances in investment income.

Unallocated Rental Income from Real Estate Assets Sold or Held for Sale

Expected Growth: 0.0%

The 0.0% growth in unallocated rental income from real estate assets sold or held for sale by AvalonBay Communities, Inc. suggests stability in this segment. Fundamental drivers include consistent demand for rental properties, steady occupancy rates, and potentially offsetting effects from asset sales and changes in rental income from held-for-sale properties.

Non-Allocated

Expected Growth: 0.0%

The 0.0% growth in Non-Allocated from AvalonBay Communities, Inc. suggests stability. Fundamental drivers include consistent demand for residential properties, effective management of operating expenses, and potentially, strategic capital allocation. This stagnation may indicate a mature market with balanced supply and demand, or a deliberate business strategy to maintain current performance levels.

7. Detailed Products

Apartment Rentals

AvalonBay Communities, Inc. offers a range of apartment rentals across the United States, providing residents with a comfortable and convenient living experience.

Luxury Apartment Communities

AvalonBay's luxury apartment communities offer high-end amenities and services, including upscale finishes, rooftop pools, and concierge services.

Student Housing

AvalonBay provides student housing options near top universities, offering amenities such as study lounges, fitness centers, and social events.

Senior Housing

AvalonBay's senior housing communities offer supportive living environments, with amenities such as community kitchens, fitness centers, and social programs.

Mixed-Use Development

AvalonBay develops mixed-use projects that combine residential, retail, and commercial spaces, creating vibrant, walkable communities.

Property Management Services

AvalonBay offers property management services, including leasing, marketing, and maintenance, to optimize property performance.

8. AvalonBay Communities, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

AvalonBay Communities, Inc. operates in a highly competitive industry, but the threat of substitutes is mitigated by the company's focus on providing high-quality apartments and amenities, making it difficult for substitutes to replicate.

Bargaining Power Of Customers

AvalonBay Communities, Inc. has a diverse customer base, and no single customer has significant bargaining power, reducing the threat of customer bargaining power.

Bargaining Power Of Suppliers

AvalonBay Communities, Inc. relies on various suppliers for materials and services, but the company's scale and negotiating power mitigate the bargaining power of suppliers.

Threat Of New Entrants

The threat of new entrants is high in the real estate industry, as new companies can enter the market and compete with AvalonBay Communities, Inc. for market share.

Intensity Of Rivalry

The real estate industry is highly competitive, and AvalonBay Communities, Inc. faces intense rivalry from established companies, making it challenging to maintain market share and pricing power.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 40.43%
Debt Cost 3.95%
Equity Weight 59.57%
Equity Cost 8.51%
WACC 6.66%
Leverage 67.87%

11. Quality Control: AvalonBay Communities, Inc. passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
VICI Properties

A-Score: 7.6/10

Value: 5.0

Growth: 7.7

Quality: 8.1

Yield: 10.0

Momentum: 5.0

Volatility: 10.0

1-Year Total Return ->

View Full Report
Stock-Card
Simon Property Group

A-Score: 6.1/10

Value: 2.1

Growth: 3.9

Quality: 6.5

Yield: 9.0

Momentum: 6.0

Volatility: 9.3

1-Year Total Return ->

View Full Report
Stock-Card
Public Storage

A-Score: 5.9/10

Value: 2.1

Growth: 5.8

Quality: 7.3

Yield: 8.0

Momentum: 2.5

Volatility: 9.7

1-Year Total Return ->

View Full Report
Stock-Card
Equity Residential

A-Score: 5.8/10

Value: 3.8

Growth: 3.9

Quality: 6.6

Yield: 8.0

Momentum: 3.0

Volatility: 9.3

1-Year Total Return ->

View Full Report
Stock-Card
AvalonBay Communities

A-Score: 5.7/10

Value: 3.5

Growth: 4.8

Quality: 6.4

Yield: 7.0

Momentum: 3.0

Volatility: 9.7

1-Year Total Return ->

View Full Report
Stock-Card
Iron Mountain

A-Score: 5.2/10

Value: 4.7

Growth: 4.1

Quality: 4.2

Yield: 7.0

Momentum: 3.0

Volatility: 8.0

1-Year Total Return ->

View Full Report

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

178.02$

Current Price

178.02$

Potential

-0.00%

Expected Cash-Flows