On Monday (NASDAQ:MNDY), Tanger Factory (NYSE:SKT) Outlet Centers (NYSE:SKT) received an upgrade from BofA Securities, with the firm's analyst changing the rating from Neutral to Buy and raising the price target to $40 from $35.
This decision was driven by the analyst's positive view on the company's future funds from operations (FFO) estimates for 2025 and 2026, as well as an acknowledgment of the company's leasing achievements throughout the year to date.
The analyst noted that Tanger Factory Outlet Centers' stock has performed better than the MSCI US REIT index (RMZ) over the past year, which contributed to the more favorable outlook. The analyst's increased confidence is partly based on the management's successful leasing activities that have surpassed initial expectations.
This success is seen as a significant accomplishment, given the challenges traditionally associated with re-tenanting efforts in the retail sector.
In the previous year, Tanger Factory Outlet Centers announced a strategic shift in their approach to leasing. Rather than simply renewing contracts with existing tenants, the company aimed to leverage a strong leasing environment to attract higher quality and more aspirational brands to their centers. The analyst's commentary highlighted this strategy as a key factor in the decision to upgrade the stock rating and price target.
The company's strong leasing performance, coupled with a robust pipeline of retail store openings planned through 2026, has reinforced the belief in Tanger Factory Outlet Centers' ability to meet its objectives. Additionally, the current low vacancy rates in retail centers, along with limited new supply, further support the analyst's optimistic view.
Tanger Factory Outlet Centers is also recognized for having one of the most solid balance sheets within the real estate investment trust (REIT) sector, which is expected to aid in its external growth. The analyst's updated stance reflects a belief in the company's continued success in achieving favorable leasing spreads and overall growth.
In other recent news, Tanger Inc. reported a significant increase in its core Funds From Operations (FFO) during the third quarter, marking an 8% rise year-over-year. The company announced a core FFO of $0.54 per share and raised its full-year core FFO guidance to $2.09-$2.13 per share.
This reflects an anticipated growth of 7% to 9%. Notably, the occupancy rate reached 97.4% with a significant 543 leases executed, and a blended rent increase of 14%..
Furthermore, analysts noted the company's strong balance sheet, low leverage, and a net debt to adjusted EBITDA ratio of 5 times. They also highlighted a 5.8% increase in the quarterly dividend. Despite some occupancy declines in certain locations due to strategic tenant replacement, these recent developments showcase Tanger Inc.'s growth and strategic positioning.
InvestingPro Insights
Tanger Factory Outlet Centers' recent upgrade by BofA Securities is further supported by several key metrics and insights from InvestingPro. The company's strong financial performance is reflected in its revenue growth of 13.36% over the last twelve months as of Q3 2024, aligning with the analyst's positive outlook on future funds from operations.
InvestingPro Tips highlight that Tanger has maintained dividend payments for 32 consecutive years and has raised its dividend for 4 consecutive years, demonstrating a commitment to shareholder returns that complements its solid balance sheet mentioned in the analyst report. The company's dividend yield stands at 3.1%, with a notable dividend growth of 12.24% in the last twelve months.
The stock's recent performance has been impressive, with a 28.71% price total return over the past three months and a 49.87% return over the last year, outpacing the MSCI US REIT index as noted in the analyst upgrade. This strong momentum is further evidenced by the stock trading near its 52-week high, with its price at 99.11% of the 52-week high value.
While these metrics paint a positive picture, investors should note that the stock is trading at a high P/E ratio of 40.83, which may suggest a premium valuation. This could be justified by the company's strong leasing performance and growth prospects outlined in the article.
For readers interested in a more comprehensive analysis, InvestingPro offers 13 additional tips for Tanger Factory Outlet Centers, providing a deeper insight into the company's financial health and market position.
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