Lucid Capital cuts CTO Realty stock target to $21, maintains Buy

On Tuesday, Lucid (NASDAQ:LCID) Capital Markets adjusted its price target for CTO Realty Group (NYSE:CTO), reducing it to $21.00 from the previous $23.00, while still recommending the stock as a Buy. Currently trading at $18.00, the company maintains a market capitalization of $593 million and offers an attractive 8.4% dividend yield. The revision follows the company’s first-quarter results for 2025, which prompted the firm to lower its estimates for CTO’s adjusted funds from operations (AFFO) and net asset value (NAV). According to InvestingPro analysis, CTO appears slightly undervalued based on its Fair Value calculations.

CTO Realty reported progress in leasing and an improvement in occupancy during the first quarter of 2025. Despite these positive developments, the rate at which the company was expected to recognize average base rent (ABR) from its signed but not yet open properties decelerated from the fourth quarter of 2024. InvestingPro data reveals that while CTO has maintained dividend payments for 50 consecutive years, its current financial health score is rated as ’FAIR’ with short-term obligations exceeding liquid assets. This led Lucid Capital Markets to decrease its 2025 estimated AFFO from $1.98 to $1.95, aligning closely with the company’s reaffirmed guidance range of $1.93 to $1.98.

The firm also adjusted its AFFO estimates for the year 2026, increasing them from $2.23 to $2.28. This optimistic revision is based on the expectation that occupancy rates will rise more quickly in 2026 as CTO Realty re-leases a number of properties, including those previously occupied by retail businesses that declared bankruptcy in the second half of 2024. The anticipated rents for these re-tenanted properties are projected to be 40% to 60% higher than previous rates.

Lucid Capital’s new $21 price target reflects 84% of its $24.90 NAV estimate for CTO Realty and is set at 11 times the projected 2025 AFFO. This valuation is compared to CTO’s retail real estate investment trust (REIT) peers, which are trading at 85% of NAV and 17 times 2025 estimated AFFO, and smaller market cap retail REITs with a market capitalization below $2.5 billion, trading at 16 times AFFO. For deeper insights into CTO’s valuation metrics and comprehensive analysis, access the full Pro Research Report available exclusively on InvestingPro, which covers over 1,400 US stocks with expert analysis and actionable intelligence.

In other recent news, CTO Realty Growth Inc. announced its financial results for the first quarter of 2025, reporting an earnings per share (EPS) of $0.01, which aligned with analysts’ expectations. The company exceeded revenue forecasts by achieving $35.81 million, surpassing the anticipated $34.88 million. Additionally, CTO Realty Growth’s Core Funds From Operations (FFO) increased to $14.4 million, a significant rise from $10.7 million in the previous year. The company’s financial position was further strengthened by the retirement of convertible notes amounting to $71.2 million. Analyst firms, including Raymond (NSE:RYMD) James and Janney Montgomery Scott, participated in the earnings call, expressing interest in the company’s leasing activities and acquisition strategies. CTO Realty Growth’s outlook for the year remains optimistic, with projections for Core FFO per share between $1.80 and $1.86. The company is focused on high-quality acquisitions and plans an investment volume of approximately $200 million. The recent acquisition of Ashley Park, a lifestyle center in Atlanta, exemplifies the company’s strategic growth initiatives.

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