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On Monday, Citi analyst Eric Wolfe initiated coverage on Millrose Properties , traded on the New York Stock Exchange under the ticker (NYSE:MRP), with a Buy rating and a price target of $30.00. Wolfe’s positive stance on the real estate company is based on its attractive dividend yield, currently at 6.52% according to InvestingPro data, and the potential for significant valuation growth. The stock appears undervalued, trading at just 0.75 times book value.
Wolfe highlighted the company’s land-banking business as a key strength, noting that it offers double-digit unlevered returns. These returns are secured through entitled-land and deposits, providing a solid foundation for the company’s financial health. InvestingPro data shows the company maintains strong liquidity with a current ratio of 19.33 and operates with moderate debt levels. The analyst expressed a general distaste for external management structures, which often focus on asset growth at the expense of returns. However, Wolfe noted that Millrose Properties stands out due to several factors.
Firstly, the company’s sponsor is contributing a valuable business to the public market, a privilege that was previously reserved for private equity investors. Secondly, Wolfe pointed out that the management agreement in place is clear and straightforward. Lastly, he believes that the current valuation of Millrose Properties already reflects the external management structure, which typically presents an additional risk. According to InvestingPro, the company maintains an overall Financial Health score of "FAIR," with additional insights available to subscribers.
Despite these advantages, Wolfe cautioned that there are unique risks associated with the company’s structure and its relationship with LEN, although these risks were not detailed in the context provided. Wolfe’s coverage initiation on Millrose Properties signals a positive outlook for the company’s stock, as reflected by the assigned Buy rating and $30.00 price target, representing potential upside from the current price of $23.31.
In other recent news, Goldman Sachs has initiated coverage on Millrose Properties with a Buy rating, setting a 12-month price target at $25. This rating implies a potential total return of approximately 21%, factoring in an anticipated forward twelve-month dividend yield of 10%. The financial firm forecasts an average earnings per share and funds from operations growth of 11% annually from 2025 through 2027. This growth expectation is linked to Millrose Properties’ strategic use of leverage to acquire additional land sites, which could lead to more option contracts. Goldman Sachs also notes that the company is currently trading at a discount of around 34% to its book value per share. However, they expect this gap to narrow as Millrose Properties demonstrates the reliability of its cash flow and expands through accretive land acquisitions. The firm believes that the market will eventually recognize the company’s value more accurately. These developments highlight the potential growth trajectory for Millrose Properties.
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