A Compelling Opportunity!After dropping 52%, IIPR is now trading at an 8x P/AFFO, significantly below historical levels.
According to GuruFocus, using IIPR has a Fair Value of $178 implying a 61.92% margin of safety based on EPS w/out NRI, by FCF, a 76% margin of safety, and by adjusted divi 57%
The PharmaCann lease defaults accounts for 16.5% of IIPR's annual base rent, its largest tenant. This is not the first time IIPR has dealt with tenant defaults. IIPR has a better chance of recovering the lost revenue in a shorter time than in the 2022 defaults due to the locations and high demand in those areas.
On a technical note, the SP is trading near historical supply/demand zones which may provide support for a bottom. the RSI dipped to a historical low of 11.3. Historically, when the RSI dips to 20 and then starts trending positive, an average of 65% gain followed before beginning an intermediate trend or breaking the primary trend.
The sell-off is exaggerated given the overall fundamental condition of the company and the % of revenue affected. The timing of the news contributed to the steep sell-off with tax-loss harvesting.
Although a speculative industry due to unknown future legislation, IIPR remains the premier cannabis REIT. I believe the company will increase positive FCF once again and quickly recover revenue as it has in the past while continuing to diversify its ABR streams.