2024-04-14 18:00:00 ET
Summary
- ACRE received a "Sell" rating on our last coverage as we anticipated a distribution cut.
- That cut came to fruition quickly and the stock is now 15% lower.
- We examine the current setup and show you why we think another distribution cut is probable.
In our last coverage of Ares Commercial Real Estate Corporation ( ACRE ) we gave it a "Sell" rating. What was unusual about our stance is that we did it in the face of a declining stock. Generally, we tend to move our ratings in the opposite direction of the stock price. As good news gets priced in and stocks move higher, we move from "Buy" to "Hold". Conversely, when stocks tank, we recognize that bad news is possibly getting priced in and move from "Sell" to "Hold", or even to a "Buy". When we wrote about ACRE, it had already dropped 25% from recent highs in a short while. Hence, staring with a "Sell" was unusual. Our rationale though was that the book value would get killed in the months ahead, and it also got a scary rating for its dividend safety....
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For further details see:
Ares Commercial: Another Distribution Cut Highly Probable In 1 Year