As Simon Property edges lower despite the BofA upgrade, should you buy or sell?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Aug 4, 2021
  • The Bank of America Securities analyst Craig Schmidt upgraded Simon Property Group shares from hold to buy.
  • Schmidt cited the redevelopment in the mall REIT market as a key catalyst.
  • However, the SPG stock price failed to react to the positive news instead, edging lower 0.50%.

On Wednesday, the Bank of America (BofA) analyst Craig Schmidt upgraded Simon Property Group Inc. (NYSE:SPG) shares from neutral to a buy rating citing continued redevelopment in the mall REIT market as a catalyst. Schmidt also raised his price target for SPG shares from $141 per share to $150, implying an upside potential of 16.7%. 

In a note to investors, he wrote:

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After a 12-month hiatus, SPG is becoming more aggressive in its mixed-use redevelopment pipeline given strong demand for mixed-use assets.

Simon Property invests in shopping malls, outlet centres, and community or lifestyle centres. Its target market suffered from the adverse effects of nationwide lockdown amid the covid-19 pandemic. However, the market is now recovering after reopening, thereby significantly boosting SPG’s revenue growth.

Nonetheless, with the delta variant forcing the Center for Disease Control and Prevention (CDC) to overturn its May directive that allowed vaccinated people to mingle without wearing masks, the immediate future remains uncertain. 

So, should you buy Simon Property Group shares in Q3 2021?

From a valuation perspective, Simon Property Group shares trade at steep P/E and forward P/E ratios of 36.77 and 26.76, respectively, making the stock unattractive to value investors.

Analysts expect SPG earnings per share to decline by 47.30% this year before increasing marginally 9.06% next year. In addition, its 5-year annual growth expectation of about 8.60% does not appeal to growth investors.

However, as of this writing, Simon Property Group traded at a dividend yield of about $4.65%, making the stock attractive to dividend investors.

Source – TradingView

Technical overview: Simon Property Group stock price forecast for August 2021

Technically, Simon Property Group shares appear to be trading within an ascending channel formation in the intraday chart. The stock recently bounced off the trendline support to surge closer to $132.75 before Wednesday’s slight pullback.

However, the stock seems far from hitting overbought conditions in the 14-day RSI, leaving more room for an upward movement. Therefore, investors will target extended rebound profits at approximately $132.75 or higher at $136.65. The support levels are $124.58 and $120.50.

Bottom line: the catalyst for buying SPG stock short term

The SPG stock’s bull-run seems set to continue after a recent rebound, boosted by Wednesday’s upgrade. However, the upward potential seems limited to the resistance levels. 

In addition, the earnings growth potential is not exciting, meaning a pullback could be on the horizon. Therefore, investors could look to buy and sell after a short time.

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