UPDATE: Jefferies Downgrades Simon Property Group (SPG) to Hold

Jefferies analyst Jonathan Petersen downgraded Simon Property Group (NYSE: SPG) from Buy to Hold with a price target of $100.00 (from $160.00).

The analyst comments "We are downgrading SPG from Buy to Hold. Malls are most exposed to discretionary consumer spending, facing greater challenges when the economy slows. While high-end consumers are still absorbing higher fuel, housing and food costs, low- and middle-income consumers are not, as last year’s government stimulus checks are no longer a backstop. Simon’s assets are weighted primarily towards high-end, Class A locations, but its mall tenants serve a wide base of consumers. A slower economic environment reduces better retail operators' store expansion plans and increases weaker retail operators' store closures, weighing on occupancy and renewal spreads. Further, in an inflationary environment: 1) SPG's base rents reset only after 7 years, making it difficult to pass rent increases quickly and 2) Retail is cyclical and the lack of retail closures in recent years (record high in 2020) suggests store closures tick up if we enter a recession.
YTD, SPG is down -37.9%, underperforming the RMZ -20.4%. SPG trades at ~8x NTM AFFO, a third lower vs its historical average (12x). Despite this low valuation, a lack of clear catalysts makes reducing the valuation gap to its multiple's historical average challenging."

For an analyst ratings summary and ratings history on Simon Property Group click here. For more ratings news on Simon Property Group click here.

Shares of Simon Property Group closed at $97.26 yesterday.

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