On Thursday, Stifel adjusted its stance on Simon Property Group (NYSE:SPG), downgrading the stock from Buy to Hold while slightly raising the price target to $159.00 from $157.50. The firm's analyst pointed out that one-time items have made it challenging to ascertain Simon Property Group's clean funds from operations (FFO) run rate.
The analyst highlighted that the current consensus estimates suggest a year-over-year decline in 2025 estimated FFO growth of -2.6%, which is slightly less pessimistic than Stifel's own projection of a -3.1% decline.
The analysis also compared the mall real estate investment trust (REIT) sector's performance to broader REITs, noting that mall REITs are expected to see a -1.9% change next year, while the wider REIT sector could potentially grow at 4.4%.
The recent monetization efforts by Authentic Brands Group (ABG) were mentioned as having clarified the financial narrative to an extent, but the resulting gains have also complicated the determination of a consistent FFO run rate.
Furthermore, Stifel's review of Simon Property Group's debt refinancing outlook suggests it may act as a negative influence on FFO. The company faces imminent debt maturities totaling $1.9 billion with an interest rate of 2.65%. Although Simon Property Group has the option to clear these bonds at maturity using available cash and short-term maturities currently earning over 5.0%, the firm anticipates that debt maturing in the future could pose challenges.
Specifically, $3.8 billion of debt with a weighted average interest rate of 3.5% is due in 2025, followed by an additional $6.2 billion at 3.92% in 2026. According to the analysis, Simon Property Group could likely issue 10-year unsecured debt at around a 5.0% interest rate.
In other recent news, Simon Property Group has witnessed several significant developments. Citi has increased the company's price target to $165, maintaining a neutral rating, following the release of Simon Property's second-quarter results. Meanwhile, Piper Sandler has downgraded Simon Property from Overweight to Neutral, reducing the price target to $175 from $190, citing anticipated challenges and slower earnings growth.
In addition to these analyst adjustments, Simon Property Group reported robust Q2 performance, leading to a record-setting real estate net operating income for the quarter. The company also raised its dividend per share to $2.05 for the third quarter, marking a 7.9% year-over-year increase.
Furthermore, following the successful sale of the company's interest in Authentic Brands Group, which generated $1.5 billion in proceeds, Simon Property Group approved equity awards to senior employees. These awards consist of 585,902 Series 2024-2 LTIP Units and shares of restricted stock, subject to a time-based vesting schedule.
Lastly, Stifel, a financial services firm, has reaffirmed its confidence in the company's long-term prospects, raising the stock price target to $157.50 and maintaining a Buy rating, despite a slight miss in Q2 funds from operations per share.
InvestingPro Insights
In light of the recent analysis by Stifel on Simon Property Group (NYSE:SPG), it's valuable to consider additional insights provided by InvestingPro. With a market cap of $61.25 billion and a robust P/E ratio of 20.76, Simon Property Group stands as a prominent player in the Retail REITs industry. This is underlined by the company's impressive track record of maintaining dividend payments for 31 consecutive years, a testament to its financial resilience and commitment to shareholder returns, as highlighted by one of the InvestingPro Tips.
InvestingPro Data also reveals that Simon Property Group has experienced a revenue growth of 7.42% over the last twelve months as of Q2 2024, indicating a healthy expansion in its operations. With a gross profit margin of 82.13%, the company demonstrates strong operational efficiency. Moreover, the stock is trading near its 52-week high, with a price 96.57% of the peak, reflecting investor confidence in its market position.
For investors seeking comprehensive analysis, there are additional InvestingPro Tips available that delve deeper into the company's financial health, stock performance, and market valuation. Accessing these tips can provide a more nuanced understanding of Simon Property Group's potential investment opportunities and risks.
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