An analyst offering a new opinion on a stock—especially when that opinion improves on earlier assessments—tends to go well for the stock in question. For real estate investment trust Vornado Realty (NYSE:VNO), it was no different. Vornado added around 4% to its market cap after an analyst bumped up the assessment of the stock.
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The latest upgrade came from Morgan Stanley, as it boosted Vornado from Underweight to Equal Weight. Several improving factors prompted the hike, starting with Vornado’s focus on New York. Since New York leasing and occupancy rates are doing a number on both the West Coast and the Sun Belt by comparison—at least for now—that’s reason enough to give Vornado some extra support.
Moreover, Vornado has an impressive presence in the Manhattan “Penn District” thanks to its Penn 1 and Penn 2 developments. Even its retail operations, which account for about 16% of net operating income, are holding up better than expected.
Not Everyone Is So Sure
This is certainly good news, but not everyone is so certain that Vornado is looking at good times. Barclays Equity Research, for example, started Vornado out as an Underweight rating only yesterday. The biggest problem for Vornado right now is its unusual concentration in the Penn District, which is “delaying stabilization.”
Of course, there’s also the matter of interest rate issues, which are hurting nearly every real estate operation thanks to the increased difficulty of getting financing. With delinquency rates on the rise and hitting commercial real estate—again, 16% of net income—that may mean a problem for Vornado sooner rather than later.
What Is the Target Price for Vornado Stock?
Turning to Wall Street, analysts have a Moderate Sell consensus rating on VNO stock based on four Holds and three Sells assigned in the past three months, as indicated by the graphic below. After a 94.94% rally in its share price over the past year, the average VNO price target of $24.86 per share implies 12.82% downside risk.
