Simon Property Group trades at a discount, now seen as a buy at Wolfe Research

Simon Property Group (NYSE:) was lifted to Outperform from Peer Perform, with a price target of $127 per share at Wolfe Research on Thursday.

Analysts told investors in a note that the company is “running out of competitors.”

“We expect internal growth to be relatively stable (~2.5% SSNOI) as share is taken from closing malls. In addition, the company is a cash engine at just ~70% AFFO payout ratio, which we assume will be used to fund external growth – particularly buybacks,” the analysts wrote.

“We believe now is a target rich environment for SPG for capital deployment – be it buybacks (given multiple) or acquisitions (as competitors retreat from the space),” they added.

The analysts also noted that SPG trades at a discount to both its strip center and overall coverage, as well as “below its historical discount to our overall coverage.”

“Our review of supply-demand in the space is constructive, which should allow for some convergence in the valuation bifurcation,” they concluded.