DA Davidson Urging Investors To Buy Weyerhaeuser Shares On Pullback

DA Davidson analyst Steven Chercover believes any pullback on Weyerhaeuser Co WY shares should provide an opportunity to acquire the biggest, as well as the most liquid timber REIT. The brokerage also upgraded shares to Buy rating from Neutral as the analyst sees 25 percent upside potentials to his price target.

The analyst thinks the U.K.'s decision to exit has increased uncertainty, as well as volatility in global equity markets. However, Chercover believes Weyerhaeuser is mainly a domestic unit. Therefore, he thinks there wouldn't be much of a change in the company's fundamentals.

The brokerage thinks any investment in the company is basically a play on the recovery of domestic housing apart from the timberland asset class in the United States. Therefore, analyst don't see any uncertainty impacting the stock due to the Brexit vote.

"We remain confident that US housing starts can reach 1.5 million and that WY can capitalize on this growth, while, in the case of a US economic slowdown, WY's liquidity, ability to allow fiber to "accumulate on the stump" and attractive dividend would allow shares to outperform peers. Leaving estimates unchanged," the analyst said in a note.

Chercover believes Weyerhaeuser is the ‘Best in Class' among the Timber REITs. He pointed out that the annual dividend of $1.24 provided an attractive yield of 4.5 percent. Therefore, the analyst urged investor to shop the stock during the pullback for capital appreciation.

At time of writing, the stock traded 4.2 percent up.