Goldman Removes Simon Property From 'Conviction Buy' List

Shares of Simon Property Group Inc (NYSE: SPG) have underperformed the markets in recent months. Goldman Sachs’ Andrew Rosivach maintained a Buy rating for the company, while reducing the price target from $243 to $236 and removing the stock from the Conviction List.

Simon Property’s shares have gained only 1.4 percent since March 3, when they were included in the Conviction List, versus a 5.2 percent increase in the S&P 500 over the same period, analyst Andrew Rosivach noted.

Need To Balance Industry Related Risks With Company’s Positive Features

Rosivach believes that Simon Property’s performance has been affected by tenants’ earnings results and not company specific factors. He added that there was a need to better balance the company’s headline risk related to tenants, tourist spending and the overall health of the bricks and mortar segment with its own positive features.

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Improved internet penetration and other risks are likely to restrict Simon Property’s chances of posting better sales growth than American malls, Rosivach commented. He added, however, that the company’s cash flow growth is likely to remain strong through 2020, driven by its long leases, strong spreads and a $2 billion pipeline.

“We believe other REIT sectors have more immediate risks to their cash flows,” the analyst wrote.