Overview
Morgan Stanley announced an upgrade of Vonovia SE, moving its recommendation from underweight to equal-weight. The change ends almost two years of a more negative stance on Germany’s largest residential landlord and accompanies a price target of €30. The stock was quoted at €27.43 on Feb. 17, which Morgan Stanley said implies roughly 9% upside to the new target. The bank also referenced a consensus target range between €23.50 and €52.90, based on Refinitiv data cited in its report.
HALO theme and investor positioning
A core reason for the upgrade is Morgan Stanley’s emphasis on what it calls HALO - Heavy Assets Low Obsolescence. The analysts argue that portfolios concentrated in residential real estate with regulated rents and lower obsolescence risk are increasingly attractive as investors reassess exposure to sectors perceived as more vulnerable to disruption from accelerating artificial intelligence adoption. Within that framing, Vonovia’s stock benefits from being part of the physical-asset bucket that could be seen as resilient in a HALO-oriented allocation.
The bank also highlighted that European real estate remains significantly underowned among global long-only funds, citing FactSet positioning data as of September 2025. That underweight status sits well below equal-weight relative to other European sectors the bank tracks, a backdrop Morgan Stanley views as supportive for selective names.
Self-help potential under new leadership
Morgan Stanley pointed to a second pillar of the upgrade: the potential for material deleveraging under a new chief executive, drawing a read-across from Luka Mucic’s time at Vodafone Group. The analysts noted that between September 2023 and late 2025, Mucic reduced Vodafone’s net debt by roughly half from about €42 billion, largely by selling non-core geographies. Applying a similar strategy at Vonovia - namely, disposing of assets outside Germany - could materially cut leverage and prompt a re-rating of the stock, the bank said.
The analysts acknowledged uncertainty around both the company’s willingness to pursue substantial disposals and the practicality of executing such sales given prevailing property market conditions. Vonovia is scheduled to report full-year 2025 results on March 19.
Valuation, earnings and dividend outlook
Morgan Stanley made clear the upgrade does not equate to an endorsement without caveats. The report flagged several persistent weaknesses: elevated financial leverage, low return on equity and continuing ambiguity around how Vonovia defines earnings per share and dividend per share metrics.
The €30 price target reflects a 40% discount to Morgan Stanley’s 2026 estimated net asset value, which the bank said encapsulates a twin challenge for the company - low total NAV-based returns versus a high cost of equity, further compounded by high leverage. The bank noted its typical long-run base discount applied to tax-paying property companies is 10%.
Morgan Stanley’s financial forecasts place 2026 EPS at €1.76, below the consensus mean of €2.09 and well under the consensus high of €4.62. For dividends the bank expects €1.10 per share, compared with a consensus range of €1.26 to €1.65.
Scenario outcomes and probabilities
The bank outlined a bull case of €45 per share, which it said carries roughly a 1.1% probability per options market data as of Feb. 17. That outcome assumes either lower bond yields or material asset sales in Sweden or Austria that would compress the NAV discount to about 20%. The bear case, at €20 per share and a roughly 17.3% probability, assumes German Bund yields spike and portfolio capital values decline by 10% relative to the base case.
Broader sector views and office exposure
Separately, Morgan Stanley retained a net underweight stance on European office exposure. The bank covers 13 stocks with significant office exposure, rating seven underweight and four overweight. It contrasted the more severe price-to-FFO de-rating seen among US office REITs - whose multiples have roughly halved in recent years following pandemic-era shifts and subsequent AI-related demand uncertainty - with the lack of a comparable de-rating in European office valuations, identifying that divergence as a potential risk ahead.
Overall, Morgan Stanley described the broader European property sector as attractive on valuation grounds, pointing to cheap prices, light positioning, improving capital availability in both debt and equity markets, and elevated mergers and acquisitions activity.
Key data points reiterated in the report
- New rating: equal-weight (from underweight)
- Price target: €30; stock trading at €27.43 as of Feb. 17
- Consensus price target range: €23.50 to €52.90 (Refinitiv)
- 2026 EPS (MS estimate): €1.76; consensus mean: €2.09; consensus high: €4.62
- Dividend forecast (MS): €1.10; consensus range: €1.26 to €1.65
- Bull case: €45 (approx. 1.1% probability); bear case: €20 (approx. 17.3% probability)