Nomura Securities Upgrades Altisource Residential (RESI) to Buy; Higher Conviction in FFO Estimates
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Nomura Securities upgraded Altisource Residential (NYSE: RESI) from Neutral to Buy with a price target of $15.00 (from $11.00) citing a higher conviction in FFO estimates.
Analyst Brock Vandervliet commented, "We are upgrading our investment rating on Altisource Residential Corp. (RESI) from Neutral to Buy and increasing our target price from $11 to $15. Our core FFO (funds from operations) per share estimates are $0.19 and $1.01 for 2016 and 2017, respectively. Following breakout of FFO components in Q1 for the standalone rental business, we began modeling FFO per share, which is the primary earnings metric for the buy-to-rent sector. We expect quarterly core FFO to scale from $0.03 in Q2 to $0.09 by Q4’16 and to $0.35 by Q4’17 as the leased portfolio scales up. These are not materially different from our previous estimates, but we have a higher conviction that they will be achieved. As part of this conviction, we shift our valuation methodology from book value to FFO, consistent with buy-torent peers. Our target price sharply rises to $15 in accordance with this shift."
Shares of Altisource Residential closed at $10.35 yesterday.
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