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On Monday, Evercore ISI analyst Steve Sakwa revised his stance on SL Green Realty Corp (NYSE:SLG), elevating the company’s stock rating from In Line to Outperform. According to InvestingPro data, the stock currently trades at $56.75, having experienced a 15.79% decline year-to-date. The broader office sector and the REIT index have both outperformed SL Green this year, following the company’s robust performance in 2024, which saw a 17.92% total return.
The downgrade of the price target to $73.00 from $74.00 reflects a nuanced view of the company’s potential, despite the stock’s underperformance. Sakwa noted that the downgrade was influenced by SL Green’s stock experiencing a 7% drop last week. InvestingPro analysis shows the stock has maintained dividend payments for 29 consecutive years, with a current yield of 5.44%. Several upcoming potential catalysts and strong Q1 leasing activity could benefit the company, though analysts anticipate a sales decline this year.
SL Green’s stock is currently trading at a significant 35% discount to Evercore ISI’s estimated net asset value (NAV) for the company, with an implied capitalization rate of 7.6%. While these figures might suggest potential undervaluation, InvestingPro’s comprehensive analysis indicates the stock may be overvalued at current levels. The company maintains strong liquidity with a current ratio of 1.14, though its financial health score suggests caution. For deeper insights, investors can access the detailed Pro Research Report, available for SLG and 1,400+ other US stocks.
Sakwa emphasized the strength of Midtown Manhattan’s office market, where SL Green primarily operates. He highlighted the high demand for quality office space, which is scarce in certain submarkets like Park Avenue. This demand for premium space in a competitive market underpins the analyst’s upgraded outlook for SL Green.
As the company looks ahead, the combination of strong leasing activity in the first quarter and the anticipated market catalysts provide a basis for Evercore ISI’s optimistic view on SL Green’s performance moving forward. The stock’s current discount and the robust office market dynamics in Midtown Manhattan contribute to the rationale behind the upgraded rating and the new price target.
In other recent news, SL Green Realty Corp reported its fourth-quarter 2024 earnings, exceeding expectations with a funds from operations (FFO) of $4.95, which was $0.09 above forecasts. However, the company’s revenue fell short of projections, recording $139.61 million against the anticipated $141.69 million. The company achieved its third-highest leasing year with 3.6 million square feet leased and ended the year with an occupancy rate of 92.5%, projecting to exceed 93% in 2025. SL Green Realty is optimistic about market conditions and plans to pursue new development opportunities in Manhattan, leveraging capital from its opportunistic debt fund. The firm also remains committed to its office-to-residential conversion strategy, anticipating over 93% leased occupancy in 2025. Analysts from Scotiabank (TSX:BNS) noted the company’s better-than-expected performance, highlighting higher net operating income and incremental fee income. SL Green Realty executives emphasized the strategic timing for expansion and noted the increase in tech tenant demand, which has doubled over the past year.
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