UBS has downgraded Swiss real estate firm Intershop Holding AG (SIX:ISN) from "buy" to "neutral," arguing that the share-price advance has largely removed the margin of safety that previously supported a more constructive stance. At the same time, the bank lifted its 12-month price target to CHF170 from CHF163 - a move that nonetheless implies only about 0.5% upside from Intershop's CHF169.20 closing price on Jan. 26.
The stock reacted negatively to the revised recommendation, slipping more than 3% on Wednesday after UBS published its note. Analysts Tommaso Operto and Charles Boissier pointed to valuation normalization as the principal reason for the downgrade. They note that Intershop's premium to 12-month forward net asset value recovered from historical lows following the stock's outperformance and now sits at around its historical premium of approximately 19%.
UBS also flagged a narrowing dividend story. Intershop's dividend yield, around 3.3%, has moved closer to the Swiss real estate peer-group average of 2.7%, reducing what had been a relative income advantage, the analysts said.
On the operating and financial forecast side, UBS trimmed its revenue estimates by an average of 2% across fiscal years 2025-27, primarily attributing the change to slower-than-expected inorganic growth. The brokerage also lowered its adjusted earnings per share forecasts by roughly 1% for the same period.
Despite these downward adjustments, UBS maintained an expectation for profit from property sales of CHF20 million - a figure that exceeds the company's own guidance of CHF15 million.
Market structure and risks noted by UBS
The analysts emphasized that a tight Swiss property market could constrain Intershop's ability to deploy capital. As they put it: "With 2025 having gone through a close to record high amount of capital issuance in Swiss real estate, and continued tight prime yields of around 2%, we see anecdotal evidence of several companies struggling to put capital to work."
UBS lowered its weighted average cost of capital assumption by 20 basis points to 3.3%, a change that helped justify the higher price target even as the recommendation was softened to neutral.
Outlook on returns, dividends and balance-sheet metrics
The brokerage expects Intershop's return on equity to move toward the company's 8% target by 2028. UBS bases that view on an anticipated rise in profits from property sales and a projected decline in the company's equity ratio to 55% from 57% in fiscal 2024.
UBS highlighted that profits from property sales have been a significant earnings driver in recent years, accounting for approximately 60% of net income over the past four years, with margins averaging 52% from 2021-24.
On distributions, UBS forecasts dividend growth of 27% from fiscal 2024 to 2028, with the payout increasing to CHF7 per share by 2028 from CHF5.50 in 2024.
The brokerage also expects Intershop's loan-to-value ratio to rise to around 38% by 2029 from 33% in fiscal 2024, a level UBS describes as among the lowest in the sector.
Share performance and valuation context
Over the past 12 months, Intershop's stock performance has been notable, rising by approximately 35% and markedly outpacing Swiss real estate peers. The shares are trading at a 42.3% premium to fiscal 2024 net asset value - the largest premium among companies covered by UBS.
Given the stock's recent run and the brokerage's revised estimates, UBS' change in recommendation reflects the view that valuation reversion has reduced the potential for further upside, even as select operating metrics and balance-sheet indicators are expected to improve over the medium term.