Instinet Downgrades Colony Starwood Homes (SFR) to Neutral; Limited Scope for Improvement
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Instinet downgraded Colony Starwood Homes (NYSE: SFR) from Buy to Neutral with a price target of $33.00 (from $38.00), citing a limited scope for further operational improvement.
Analyst Brock Vandervliet commented, "We are downgrading SFR from Buy to Neutral and reducing our TP from $38 to $33. SFR’s stock performance since the merger (SWAY/CAH) in January has been impressive, rising 34%. Our downgrade is based on a combination of incrementally greater concern regarding the potential for higher interest rates, historically a headwind for all REIT stocks, combined with a limited ability to materially improve financial performance. In addition, although we believe there is great long-term consolidation potential in this sector, at this valuation we do not expect large-scale share issuance that would allow SFR a currency for large-scale acquisitions. Following the Q3 print and several discussions with management, we trim our 2017 Core FFO estimate from $1.90 to $1.89 and reduce our target multiple from 20x to 17.5x, with a revised TP of $33. In the BTR space, we favor Altisource Residential, RESI (Buy) which has a substantially more discounted valuation and, in our view, more operational efficiency gains ahead of it."
Shares of Colony Starwood Homes closed at $30.16 yesterday.
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