Goldman Sachs: For Paramount Group, Improving Micro Conditions Balance Macro Challenges

Paramount Group Inc PGRE shares have sold off steeply since late last year, and consequently are trading at a wider discount to peers versus their historical average, according to Goldman Sachs. 

The Analyst

Analyst Andrew Rosivach upgraded shares of Paramount Group from Sell to Neutral and increased the 12-month price target from $15 to $16.

The Thesis

Macro drivers for Paramount Group remain challenging given the combination of decelerating job growth and increasing supply growth, Rosivach said in a Tuesday note. (See the analyst's track record here.) 

The company is likely to benefit in 2018 from improving micro conditions such as reduced near-term leasing risk and improving same-store occupancy, Rosivach said. 

Goldman expects the company to have the highest same-store net operating income growth among its office coverage in 2018 and 2019.

"Since being added to the Americas Sell List on June 22, 2017, the stock is down 12.8 percent versus [an 8-percent decline] for RMZ and an 8.8-percent [rise] for the S&P 500," the analyst said. 

Citing the reduced near-term leasing risk and improvement in tenant demand fundamentals following tax reform, Rosivach said Paramount merits an in-line multiple to its coverage.

The Price Action

Paramount Group shares are down over 13 percent over the past year.

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