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On Friday, Evercore ISI analyst Diane Pfenningwerth upgraded Sunstone Hotel (NYSE:SHO) Investors stock, listed on the New York Stock Exchange (NYSE: SHO), from In Line to Outperform, setting a new price target of $10.00. The upgrade was based on the company’s year-to-date underperformance compared to its peers, with Sunstone’s shares declining by 24.88% year-to-date. Currently trading at $8.81, the $1.75 billion market cap company offers a 4.09% dividend yield. InvestingPro analysis indicates the stock is trading above its Fair Value, with 8 additional key insights available to subscribers.
Sunstone Hotel Investors faced challenges earlier this year, including construction delays at their Miami property, which caused them to miss out on the lucrative first-quarter peak season. Additionally, the company saw slower recovery rates in its Maui and San Diego locations. Speculation around potential takeovers for smaller portfolios like Sunstone’s, which had previously been factored into the stock’s performance, has also diminished. Despite these challenges, InvestingPro data shows management has been actively buying back shares, and analysts expect the company to remain profitable this year.
Despite these setbacks, Pfenningwerth noted that major renovation projects have now been completed. These renovations are expected to provide significant benefits for the company starting in the second half of the year. The analyst anticipates that Sunstone’s year-over-year earnings growth through 2026 will surpass that of its peers, following a reset in this quarter’s performance.
The potential sale of a wine country asset is also seen as a positive move that could further enhance Sunstone Hotel Investors’ valuation. The company’s completion of its renovation projects and the expected tailwinds from these improvements have contributed to the analyst’s optimistic outlook on the stock’s future performance.
In other recent news, Sunstone Hotel Investors reported its first-quarter earnings for 2025, meeting Wall Street’s expectations with an earnings per share (EPS) of $0.01. However, the company fell short on revenue, reporting $234.07 million against the anticipated $240.72 million. Despite the revenue miss, Sunstone Hotel Investors demonstrated a 17% year-over-year increase in Adjusted Funds From Operations (FFO) per diluted share, reaching $0.21. The company also expanded its hotel margins by 80 basis points, driven by strong demand in several markets. Analysts from firms such as Jefferies and Bank of America have noted the company’s strategic capital allocation, including asset sales and share repurchases. Sunstone Hotel Investors projects Adjusted EBITDAre for the full year 2025 to be between $235 million and $260 million, with expected Adjusted FFO per share ranging from $0.82 to $0.94. CEO Brian Giulia expressed confidence in the company’s strategic initiatives, emphasizing the focus on asset recycling and capital allocation to maximize shareholder returns. The company continues to navigate economic uncertainties, with plans for significant capital investments ranging from $80 million to $100 million.
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