Analyst: Rumor Mill Likely To Keep Taubman Centers Shares Elevated

Taubman Centers, Inc. TCO shares are likely to stay elevated near-term due to a confluence of factors, according to BMO Capital Markets. 

The Analyst

BMO Capital Markets analyst Jeremy Metz upgraded shares of Taubman Centers from Underperform to Market Perform and increased his price target from $48 to $60.

The Thesis

A flurry of M&A activity, activist involvement and speculation in the mall sector could serve to catalyze an upward move in shares of Taubman Centers, lifting them off their recent lows in the near term, Metz said in a Tuesday note. (See Metz' track record here.) 

This is despite the still-challenging fundamental backdrop and lingering investor concern regarding governance and safety, he said. 

Elliot Management disclosed a 3.8-percent stake in the company, and this — along with a pickup in retail REIT M&A activity — helped lift Taubman shares from a recent bottom near $46 in early November.

Unibail-Rodamco UNRDY's agreement to buy Westfield Corp Ltd (ADR) WFGPY for $16 billion was the latest in a string of recent M&A/activist activity in the space, the analyst said.

"We expect the flurry of activity to keep shares/expectations elevated for both TCO and peer Macerich Co MAC, which also gained stakes from activists Third Point and Starboard in recent months." 

Taubman's highly productive portfolio and digestible size have made it an attractive acquisition candidate, although the management has resisted such overtures in the past, Metz said. 

"Given the Taubman family's control, the path ahead is not necessarily easy as deep pockets have unsuccessfully gone after it in the past, and with two more potential buyers (UL/WFD) likely out of the market." 

The Price Action

Taubman Centers shares have pulled back about 15 percent since the start of the year.

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Photo courtesy of Taubman Centers.