Macerich Co MAC stock has been on a lean run for some time now, prompting Goldman Sachs to revisit its bearish stance on the REIT.
The Analyst
Analyst Caitlin Burrows upgraded Macerich from Sell to Neutral and increased the price target from $52 to $60.
The Thesis
Demand for space at high-quality properties will support Macerich's internal growth, Burrows said in a Tuesday note.
Macerich's discount to the REIT sector is larger than its historical average, the analyst said.
Burrows named the following as positives: a 13-percent improvement in Macerich's sales productivity achieved on the back of organic sales growth; an improvement in tenant mix; and disposition of lower-quality properties.
After large-scale store closures impacted occupancy and same-center growth, Burrows said portfolio quality and company-specific revenue-driving and cost-saving initiatives will prop up same-store net operating income going forward.
Macerich's external earnings growth is likely to be constrained by continuing funds from operations-diluting dispositions and limited development, the analyst said.
The refinancing outlook for Macerich is negative, Burrows said.
Goldman's funds from operations estimates for Macerich in 2018-2020 are near the consensus, but multi-year FFO growth is likely to be below its coverage average, the analyst said.
The Price Action
Since its addition to Goldman's Americas Sell List on March 17, 2017, Macerich shares have lost about 10.4 percent compared the to MSCI US REIT Index's 0.9-percent gain and the S&P 500's 17.7-percent advance.
The stock was down 0.16 percent at $57.42 at the close Tuesday.
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