Bullish indicating open at $55-$60, IPO prices at $37
On Thursday, Barclays (LON:BARC) downgraded LEG Immobilien AG (ETR:LEGn) (LEG:GR) (OTC: LEGIF) stock from Overweight to Equal Weight and reduced the price target to €70.00 from the previous €100.00. The downgrade was influenced by the company’s decision to fund the acquisition of BCP through debt rather than equity, a move that did not sit well with the analysts or investors. The acquisition, which gave LEG Immobilien full ownership of BCP, resulted in no additional funds from operations (AFFO) and increased leverage, which were viewed negatively.
The analysts had initially rated LEG Immobilien AG as Overweight based on the expectation that the company would pursue equity-funded acquisitions, potentially leading to growth. However, this expectation was not met, prompting the reassessment of the stock’s rating. Furthermore, the anticipated relative attraction of the company’s AFFO yield did not provide sufficient support for the stock, leading to its underperformance compared to its peers in the German residential sector over the past year.
Barclays noted that while LEG Immobilien’s AFFO yield was not the highest in the sector, it was initially thought to potentially offer the best growth prospects, especially as other companies faced more significant refinancing challenges. Nevertheless, these factors did not materialize as expected, and the stock has become less attractive compared to other companies covered by Barclays.
The 30% reduction in the price target to €70.00 reflects a reassessment of the appropriate AFFO yield in light of the increase in German Bund yields. Barclays’ lowered price target is a result of the revised expectations for the company’s financial performance and market position. Despite the underperformance of LEG Immobilien’s shares over the past year, Barclays does not anticipate a change in the trend and, as a result, sees no reason to maintain the previous Overweight rating.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.