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On Monday, Truist Securities made a slight adjustment to its stance on SL Green Realty (NYSE:SLG) Corp, increasing the company's price target from $61.00 to $62.00. The firm retained a Hold rating on the stock. The adjustment comes after SL Green reported fourth quarter 2024 financial results that surpassed the guidance provided by management and also exceeded the projections of Truist Securities. According to InvestingPro data, the company's stock currently trades at $67.60, with a notably high P/E ratio of 822.25, suggesting potential overvaluation compared to its Fair Value.
Michael R. Lewis (JO:LEWJ) of Truist Securities explained the rationale behind the updated price target, stating that the adjustment reflects an increase in the estimated funds from operations (FFO) for the years 2025 and 2026. Specifically, the estimate for 2025's net FFO was raised by 0.9%, and the 2026 projection saw an increase of 3.9%. This revision was prompted by the stronger-than-anticipated quarterly performance, with InvestingPro data showing impressive revenue growth of 15.83% over the last twelve months. The company maintains a strong dividend tradition, having paid dividends for 29 consecutive years, with a current yield of 4.68%.
The report from January 22, which detailed the fourth quarter results, highlighted that SL Green's earnings were above consensus expectations, with the company's guidance for 2025 remaining unchanged since the Investor Day in December 2024. The new price target of $62 is said to align with Truist's assessment that the stock is approximately fairly valued at present.
Lewis also noted the challenges facing the office real estate market, which are part of the valuation consideration. These include the task of rebuilding occupancy rates for SL Green, which is expected to involve significant capital expenditures in the near term. Additionally, potential sensitivity to interest rate changes is also factored into the valuation. InvestingPro analysis reveals several key challenges ahead, including anticipated sales decline and volatile stock price movements. For deeper insights into SL Green's financial health and future prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
The updated price target and hold rating reflect Truist Securities' view that, despite the positive performance in the fourth quarter of 2024, SL Green faces headwinds that warrant a cautious but slightly optimistic outlook. The company's efforts to navigate the office market's challenges while managing capital expenditures and interest rate risks will continue to be areas of focus for investors and analysts alike.
In other recent news, SL Green Realty Corp. experienced a surge in its shares following the company's Q4 results, which exceeded average analyst estimates. The company reported an increase in Funds From Operations (FFO) per share of $1.81, surpassing the previous year's 72 cents per share. Revenue for the quarter was $245.9 million, a year-on-year increase of 16%, while net operating income stood at $77.9 million, a 7.8% increase from the same period last year.
Additionally, the company extended CEO Marc Holliday's term until July 18, 2028, with an annual base salary of $1.4 million. This extension follows an agreement made between Holliday and the company, with his compensation package also including long-term incentive plan units valued at no less than $5 million annually.
Analysts from firms such as JPMorgan, Jefferies, Barclays (LON:BARC), Truist Securities, and BMO Capital Markets have adjusted their targets for SL Green Realty. JPMorgan notably raised its target for the company to $80 from $51. These are among the recent developments for SL Green Realty Corp.
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