Tuesday, Piper Sandler adjusted its price target on The Macerich Company (NYSE:NYSE:MAC) shares, raising it to $14.00 from the previous $11.00, while keeping an Underweight rating on the stock. The firm's analyst has updated the financial forecasts for Macerich, modifying the expected Funds From Operations (FFO) for 2024, maintaining the projection for 2025, and providing an initial estimate for 2026.
The revised FFO for 2024 is now set at $1.57, a slight decrease of $0.01 from the earlier estimate. The 2025 FFO expectation remains unchanged at $1.50, with a new 2026 FFO estimate introduced at $1.51. These adjustments take into account the company's performance in the second quarter of 2024 and the anticipated property sales totaling $400 million in the second half of 2024 and $600 million in 2025.
As part of Macerich's four-year turnaround strategy, the analyst also anticipates the company to raise $500 million in equity in the second half of 2025, which is expected to coincide with the lowest point in earnings for that period. Additionally, a reduction in the assumed capitalization rate by 50 basis points to 7% has led to an increase in the Net Asset Value (NAV) estimate, now set at $21.90, up from $18.10.
Piper Sandler's valuation approach has shifted towards a 2025E target FFO multiple, currently estimated at approximately 9 times, in comparison to the roughly 7 times multiple based on the 2024E FFO previously used. This change in methodology is in line with the firm's usual practice of updating its valuation perspective mid-year.
In other recent news, The Macerich Company has been the subject of an upgraded stock price target by Compass Point, which now stands at $20.00, up from $18.00. This adjustment comes due to the company's strong performance, particularly within the high-end mall sector. Compass Point maintains a Buy rating on the stock, indicating a positive outlook for Macerich.
Despite some concerns about the company's higher-than-ideal leverage, Compass Point analysts expect strong underlying net operating income growth, supported by a substantial signed but not opened pipeline worth $70 million, and annual fixed rent increases of 3%. In addition, Macerich has expressed intentions to actively pursue both asset sales and debt restructuring, aiming to diminish total debt by $1 billion by the end of the year.
In operational developments, Macerich reported a consistent Funds From Operations per share at $0.39 and a 1.3% increase in Same Center Net Operating Income during its Second Quarter 2024 Earnings Conference Call. The company has been focusing on robust leasing activity and a significant debt reduction plan, having already reduced its debt by $110 million.
Redevelopment projects are ongoing at several of the company's key properties, which are expected to boost net operating income by $36 million. With a strong leasing pipeline, Macerich anticipates an influx of $71.4 million in incremental rent over the next three years.
InvestingPro Insights
With Piper Sandler's recent adjustment on Macerich's price target, investors might be looking for additional context to gauge the stock's potential. According to InvestingPro data, Macerich has a market capitalization of $3.61 billion. The company's financial health shows a P/E ratio of -45.06, reflecting market skepticism about its earnings potential. However, the adjusted P/E ratio for the last twelve months as of Q2 2024 is slightly higher at -36.38, indicating some improvement in investor sentiment.
InvestingPro Tips suggest that Macerich's stock price could experience significant volatility, which aligns with the analyst's cautious stance. Despite the potential for net income growth this year, the company is not expected to turn a profit within the same timeframe. This could be of particular interest to investors considering the firm's long history of dividend payments—31 consecutive years—which might be seen as a sign of financial resilience. Additionally, Macerich's short-term obligations currently exceed its liquid assets, which could signal liquidity risks that investors may want to monitor closely.
For those interested in a deeper analysis, InvestingPro offers additional insights on Macerich, including more InvestingPro Tips to help investors make informed decisions. Visit https://www.investing.com/pro/MAC for a comprehensive list of tips and metrics tailored to Macerich's financial profile.
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