Wells Fargo analyst Donald Fandetti maintained a Hold rating on Ares Commercial (ACRE – Research Report) yesterday and set a price target of $7.50.
Donald Fandetti has given his Hold rating due to a combination of factors regarding Ares Commercial Real Estate Corp.’s (ACRE) current financial performance and its prospects. The first quarter results showed a distributable earnings per share (DEPS) loss that was notably lower than both the analyst’s and consensus estimates. This underperformance was attributed to realized losses, although when these were excluded, the DEPS was positive. Additionally, there was a quarter-over-quarter decline in the company’s book value. Despite these setbacks, ACRE managed to maintain its dividend payout, which translates to a high annualized yield based on the current share price.
Fandetti’s assessment also considers updates to Ares Commercial’s loan portfolio, which has decreased in size but has seen some improvement with the resolution of underperforming loans. The reduction of non-accrual loans represents progress, yet the analyst underscores the ongoing credit pressure and the potential risk of new non-accruals. While the possibility of Federal Reserve rate cuts could improve credit conditions and sentiment towards commercial real estate lending, Fandetti maintains an Equal Weight rating, signaling a neutral stance on the stock until the company’s credit issues are more fully resolved and the lending environment appears more favorable.
According to TipRanks, Fandetti is a 5-star analyst with an average return of 10.3% and a 62.40% success rate. Fandetti covers the Financial sector, focusing on stocks such as American Express, Capital One Financial, and Discover Financial Services.
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Ares Commercial (ACRE) Company Description:
Ares Commercial Real Estate Corp. engages in originating and investing in commercial real estate loans and related investments. The Company’s investments include senior mortgage loans, subordinated debt, preferred equity, mezzanine loans and other commercial real estate investments, including commercial mortgage backed securities, which are secured, directly or indirectly, by office, multifamily, retail, industrial, lodging, senior-living, self storage, student housing and other commercial real estate properties, or by ownership interests. Ares Commercial Real Estate was founded in September 2011 and is headquartered in New York, NY.
