UPDATE: Bank Of America Downgrades Dillard's On Little Room For Further Multiple Expansion

In a report published Friday, Bank of America analyst Heather Balsky downgraded the rating on Dillard's (NYSE: DDS) from Buy to Neutral, but reiterated the $125.00 price target.

In the report, Bank of America noted, “We are downgrading Dillard's to Neutral from Buy as shares are trading near our $125 price objective. Marcato reported Thursday that it has a 4.9% stake in Dillard's and is encouraging the company to spin off its real estate into a REIT. The fund believes Dillard's is worth $193 per share under an OpCo/PropCo structure. Our OpCo/PropCo analysis points to a lower $124 per share valuation. Dillard's above peers earnings growth and strong free cash flow validate the current stock price and we expect Marcato's activism to support current levels. We view a REIT conversion as unlikely and we see little room for further multiple expansion with shares trading near 6.5x F2015E EV/EBITDA.”

Dillard's closed on Thursday at $121.04.