Short Trade Idea
Enter your short position between $27.69 (an intra-day low that touched the mid-range of its bearish price channel) and $28.86 (an intra-day high before a minor pullback).
Market Index Analysis
- Invitation Homes (INVH) is a member of the S&P 500 Index.
- This index rides the AI wave up and down, but bearish catalysts are strengthening.
- The Bull Bear Power Indicator of the S&P 500 Index turned bullish with a descending trendline.
Market Sentiment Analysis
Equity markets finished mixed yesterday, as investors rotated out of AI names, sending the NASDAQ 100 Index lower, and rotating into defensive sectors, pushing the Dow Jones Industrial Average to fresh highs. Investors received a dismal ADP report showing job losses in its latest survey. Optimism remains after the Senate passed a measure to reopen the government on Monday, with the House of Representatives likely to vote as soon as today. Earnings season is slowing, with Cisco, Disney, and Applied Materials among the highlights for the rest of the week.
Invitation Homes Fundamental Analysis
Invitation Homes (INVH) is a REIT with over 86,000 single-family homes in 16 markets. Since 2017, it has been the most prominent US owner of single-family homes in the upper end of the market, with average tenant household income of approximately $100,000.
So, why am I bearish on INVH after its earnings report?
INVH reported third-quarter revenues of $688.17 million with earnings per share of $0.47. Estimates were looking for $679.29 million and $0.47, respectively. Neither figure sparked optimism about the medium term, and the drag from the overall housing market could limit the upside potential. Despite its position to capture migration trends, the figures have not acted as bullish catalysts, and I see no further impacts from interest rate cuts.
Invitation Homes Fundamental Analysis Snapshot
The price-to-earnings (P/E) ratio of 30.15 makes INVH an expensive REIT. By comparison, the P/E ratio for the S&P 500 is 30.65.
The average analyst price target for INVH is $35.43. This suggests good upside potential but above-average downside risks.
Invitation Homes Technical Analysis
Today’s INVH Signal
Invitation Homes Price Chart
- The INVH D1 chart shows price action inside a bearish price channel.
- It also shows price action between its descending 38.2% and 50.0% Fibonacci Retracement Fan levels.
- The Bull Bear Power Indicator turned bullish but remains below its descending trendline.
- The average bullish trading volumes are decreasing, with spikes in bearish trading volumes.
- INVH is descending as the S&P 500 Index grinds higher, a significant bearish trading signal.
My Call
I am taking a short position in INVH between $27.69 and $28.86. The Return on Invested Capital (ROIC) is below the Cost of Capital (WACC), confirming value destruction. The real estate market remains under pressure, revenue growth is sluggish, the dividend is sub-standard, and valuations are high.
- INVH Entry Level: Between $27.69 and $28.86
- INVH Take Profit: Between $22.46 and $23.15
- INVH Stop Loss: Between $29.72 and $31.33
- Risk/Reward Ratio: 2.58
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