Friday, Credit Suisse upgraded Realty Income Corp. (O) shares to Outperform from Neutral and increased its pr ice target to $27 from $23.
Analyst Rosivach upgraded the stock and increased price target based on relative valuation and acquisitions as an upside catalyst. The analyst believes a key bear case is that defaults of poor credit tenants will lead to higher vacancy and a distribution cut.
The analyst thinks this view must be tempered by Realty Income credit underwriting that has led to strong performance in Chapter 11 bankruptcies, Realty Income financial strength, which both reduces topline sensitivity to earnings and provides sources for short term distribution shortfalls.
The analyst's 2010 FFO estimate of $1.85 is based on $250 million of acquisitions over the course of 2010. Larger or faster acquisitions would lead to potential upside to the analyst's estimates-and greater distribution coverage.
Currently, O is up $0.45 or 1.93% and trading at $23.81.
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