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Retail REIT Simon Property Group (NYSE:SPG) was downgraded at Piper Sandler on the back of an anticipated slower earnings growth.
SPG was trading 1.40% lower Tuesday pre-market at $165.00.
The investment bank and financial services company sees slower earnings growth at SPG, compared to shopping centers, over the next two years.
“The growing headwind comes from more refinancing of low coupon debt to higher rate; though, we are now assuming 5% given the recent 10-year pull-back,” analysts Alexander Goldfarb and Connor Mitchell said in a research report.
The analysts see better near-term growth at shopping centers, driven by faster occupancy and cash net operating income growth.
Piper Sandler lowered its recommendation on SPG to Neutral from Overweight, and reduced the price target to $175 from $190.
The rating aligns with the average Seeking Alpha analysts’ rating and Quant rating of Hold.
Quant gives the stock a score of 3.06 on a scale of 5, with a B for Valuation and Revisions, C+ for Growth, A+ for Profitability and B+ for Momentum.
Meanwhile, the average sell-side analyst rating on the stock is Buy. Out of 18 Wall Street analysts that have graded SPG in the last 90 days, 11 see the stock as a Hold.
Additionally, Piper Sandler raised its 2024 FFO estimate on SPG to $12.89 from $12.86. The consensus FFO estimate stands at $12.82. The 2025 FFO estimate was lowered to $12.51 from $12.60, vs. $12.46 consensus.
Piper Sandler updated the estimates after Q2 results, assuming ~$2B of debt repaid in H2; ~4% NOI growth in 2025 and 2026, vs. prior 2025 projection of 5.5% growth; and 5% refinancing rate, vs. the prior 6%.
The investment bank also introduced a 2026 FFO estimate of $12.71, vs. $12.80 consensus.
