On Thursday, RBC Capital Markets revised its stance on Allied Properties Real Estate Investment Trust (AP-U:CN) (OTC: APYRF), downgrading the stock to Sector Perform from its previous Outperform rating. The firm also adjusted the price target to Cdn$18.00, a decrease from the former Cdn$19.00.
The downgrade follows the company's second-quarter results, which RBC Capital found disappointing, citing more significant near-term impacts from recent transactions with Westbank than initially anticipated. The report highlighted that the results were not only below expectations due to these transactions but also indicated a step back in the company's growth profile.
RBC Capital noted that Allied Properties faces challenges ahead, particularly in reducing leverage and addressing an elevated payout ratio. These factors contribute to the expectation that the stock will likely remain range-bound in the near future.
Despite the downgrade, RBC Capital acknowledged the long-term potential of Allied Properties due to its discounted valuation, high-quality portfolio, and strong platform. However, the firm emphasized that signs of a sustained turnaround would be necessary for broader market sentiment to improve and for the stock to gain more favorable attention from investors.
The report concluded with a recognition of the appeal that Allied Properties may hold for investors with a longer-term perspective, but it also underscored the need for clear indications of performance improvement to shift the current cautious outlook on the stock.
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