Sandler O'Neill Cuts Vornado to Buy, Says Stock Undervalued Amid Potential Break-Up

In a recent note on Vornado (NYSE: VNO), Sandler O'Neill analyst Alexander Goldfarb cited accelerated non-core sales and a potential split-up as catalysts for a $95.80 valuation. The analyst upgraded the stock from Hold to Buy and raised the price target from $86 to $96.Goldfarb thinks VNO should be split into three companies: Office, Retail, and Liquidation. He estimates the values of each at $75, $16.20, and $4.60, respectively. The liquidation vehicle has an estimated worth of $900 million and, according to Goldfarb, if VNO were to recycle back into core office, it would provide $1.8 billion of levered buying capacity.He called for exiting TOYS despite prices less than fair value, because the boost to VNO shares would probably offset any discount in TOYS price. Google may be a likely buyer of the Chicago Merchandise Mart, which is similar to 111 8th Ave in New York, acquired by Google in 2010.According to the note, VNO is likely to exit the JCP position in the “not-too distant future.” Goldfarb believes the company should sell 220 Central Park South to another developer given its healthy value and the condo market volatility.