U.S. Markets open in 6 hrs 12 mins
  • S&P Futures

    +0.50 (+0.01%)
  • Dow Futures

    +10.00 (+0.03%)
  • Nasdaq Futures

    -3.00 (-0.03%)
  • Russell 2000 Futures

    -0.80 (-0.04%)
  • Crude Oil

    -0.03 (-0.04%)
  • Gold

    +1.50 (+0.08%)
  • Silver

    +0.11 (+0.47%)

    -0.0009 (-0.0837%)
  • 10-Yr Bond

    0.0000 (0.00%)
  • Vix

    +1.42 (+6.84%)

    +0.0004 (+0.0291%)

    +0.6700 (+0.4892%)

    -251.95 (-1.48%)
  • CMC Crypto 200

    -8.04 (-2.00%)
  • FTSE 100

    -8.66 (-0.12%)
  • Nikkei 225

    -199.47 (-0.72%)

Is it Wise to Retain Simon Property (SPG) Stock Right Now?

Given the recovery in the retail real estate industry, Simon Property Group’s SPG portfolio of premium assets in the United States and abroad, adoption of omni-channel retailing and balance-sheet strength position it well for growth.

This retail REIT behemoth enjoys a wide exposure to retail assets across the United States. Additionally, its presence in the international markets is likely to encourage sustainable long-term growth compared with its domestically focused peers.

Simon Property’s adoption of an omni-channel strategy and successful tie-ups with premium retailers paid off well, especially during the pandemic. Its online retail platform, coupled with an omni-channel strategy, is likely to be accretive to its long-term growth. Further, its efforts to explore the mixed-use development option, which has gained immense popularity in recent years, enables it to tap the growth opportunities in areas where people prefer to live, work and play.

Going forward, an improving leasing environment is likely to benefit this retail REIT’s properties at premium locations. During the six months ended Jun 30, 2022, it signed 673 new leases and 814 renewal leases (excluding mall anchors and majors, new development, redevelopment and leases with terms of one year or less) with a fixed minimum rent across its U.S. Malls and Premium Outlets portfolio.

Also, the retailer’s sales per square foot for the malls and the outlets combined touched a record high during the second quarter. With the improving economy and healthy consumer confidence, this trend is expected to continue in the upcoming period.

To enhance its portfolio, Simon Property has been focusing on premium acquisitions and transformative redevelopments and has invested billions for transforming its properties. Moreover, it capitalized on purchasing recognized retail brands in bankruptcy. With the brands generating a decent amount from digital sales, investments in them seem strategic for Simon Property.

The company maintains a solid balance-sheet position with ample liquidity. It exited second-quarter 2022 with $8.5 billion of liquidity and a fixed-charge coverage ratio of 5.1, which is well ahead of the required level. SPG also enjoys investment-grade credit ratings, giving it favorable access to the debt market. With strong financial footing and enough financial flexibility, it is well-placed to capitalize on long-term growth opportunities.

Shares of Simon Property have gained 9.0% in the quarter-to-date period compared with its industry’s growth of 3.2%.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

However, given the conveniences of online shopping, rising e-commerce adoption is still a concern for Simon Property. Online retailing will likely remain a popular choice among customers, thus adversely impacting the market share for brick-and-mortar stores.

Further, higher interest rates might increase the company's borrowing costs, affecting its ability to purchase or develop real estate. More so, the dividend payout might become less attractive than the yields on fixed income and money market accounts.

Analysts seem bearish on this Zacks Rank #3 (Hold) stock. The Zacks Consensus Estimate for the company’s 2022 funds from operations (FFO) per share has moved marginally downward over the past week, indicating an unfavorable outlook for SPG.

Stocks to Consider

Some better-ranked stocks in the retail REIT sector are STORE Capital STOR, Kite Realty Group Trust KRG and Tanger Factory Outlet Centers SKT, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for STORE Capital’s 2022 FFO per share has moved 1.3% upward in the past week to $2.27.

The Zacks Consensus Estimate for Kite Realty’s 2022 FFO per share has moved 1.1% upward in the past month to $1.84.

The Zacks Consensus Estimate for Tanger Factory Outlet Centers’ ongoing year’s FFO per share has been raised marginally over the past month to $1.76.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Simon Property Group, Inc. (SPG) : Free Stock Analysis Report
Tanger Factory Outlet Centers, Inc. (SKT) : Free Stock Analysis Report
Kite Realty Group Trust (KRG) : Free Stock Analysis Report
STORE Capital Corporation (STOR) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research