We are changing our long-term recommendation for AMB Property (AMB) to Underperform from Neutral as we anticipate the stock to perform well below the broader market. Fiscal 2010 earnings estimates were reduced by 11 out of 13 analysts covering the stock, while none increased them over the last 30 days.
With a decline in commercial real estate fundamentals, demand for AMB’s services has decreased comparatively. However, AMB’s second quarter 2010 results were in line with the Zacks Consensus estimate.
Our long-term Underperform recommendation on the stock indicates that AMB would perform well below the broader market. Our target price of $24.00 at 19.5X 2010 FFO/Share factors in this view. Over the last five years, AMB s shares have traded in a range of 4.1X to 21.2X trailing 12-month FFO.