J.P. Morgan Reiterates Overweight on Simon Property Group (SPG)

J.P. Morgan is out with a research report this morning, where it reiterates its Overweight rating on Simon Property Group SPG; it has a $103.00 price target on the stock. The J.P. Morgan analysts cited the company's recently announced quarterly earnings report, which beat the Street's estimates; the company also raised guidance well above what the analysts expected. The analysts believe that the bigger than expected guidance increase is related to a combination of management being conservative with its early guidance and operations continuing to track better than anticipated. From an operational perspective, the portfolio continued to move in the right direction with a double-digit sales increase and occupancy that was running 80 bps higher than last year's comp. As for valuation, the analysts remarked, “We arrived at our YE 2011 target price of $103 primarily based on a DCF analysis. We applied a long-term growth rate of about 5% to our current AFFO estimates and utilized a 9.25% discount rate. Our discount rate is at the lower end of the 8.5%-11% band we now use for most REITs and reflects Simon's strong liquidity position and portfolio mix. Our growth rate attempts to factor in leveraged longer-term core growth plus some external growth largely related to development/redevelopment/acquisitions.”