On Thursday, Jefferies analysts revised their stance on Kimco Realty Corporation (NYSE:KIM), downgrading the stock from Buy to Hold and adjusting the price target to $25.00 from the previous $28.00.
The change reflects a cautious outlook based on several factors anticipated to impact the company in 2025.
Kimco, recognized as the largest-cap company in its sub-sector, faces a year of significant debt maturity with $744 million due in 2025. However, the company has already pre-funded $500 million of this amount, leaving a manageable $244 million remaining.
Despite this preparation, concerns arise from a projected decline in interest income due to a lower expected cash balance in 2025. Kimco's high cash balance in 2024 is forecasted not to continue, with estimates suggesting a go-forward basis of $100 million, which could lead to reduced interest income the following year.
The analysts acknowledged Kimco's solid positioning in the market, bolstered by its scale and liquidity. Nevertheless, they indicated a preference for smaller-cap strip malls that have higher growth potential through acquisitions or could be considered potential buy-out targets by Blackstone (NYSE:BX). This perspective comes in light of Blackstone's recent investments in shopping centers, including a $282 million acquisition in London, approximately $200 million in Soho, and around $4 billion for Retail Opportunity Investments (NASDAQ:ROIC) Corp.
While Kimco remains well-positioned given its size and liquidity, Jefferies analysts suggest that its larger scale may not be as advantageous in the current environment. This viewpoint is influenced by the competitive landscape, where Blackstone has been actively purchasing sizeable shopping center portfolios.
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