NNN REIT's (NNN) rate-driven selloff creates an opportunity as the company's defensive portfolio characteristics and balance sheet remain underappreciated, Morgan Stanley said in a research report emailed Tuesday.

The brokerage said it modelled adjusted funds from operations per share growth to inch over 3.5% annually over the next three years, adding that the company appears best-positioned with a manageable headwind from higher rates as 30% of its debt matures by the end of this decade.

Analysts further supported the view that impact from higher refinancing rates is manageable by highlighting the company's 97% of debt fixed rate and 23% of debt maturing through 2028 at interest rates of 3.5% to 4.3%.

Performance metrics for tenant health, including occupancy, tenants on cash basis accounting, and rent coverage levels, imply that tenant health trends could be at the "strongest level" since the COVID-19 pandemic, according to the note.

The brokerage said it upgraded the stock to overweight from equalweight with a price target of $50 per share.

Price: 41.50, Change: -0.14, Percent Change: -0.32