Hype Asset of the Day - SL Green Realty Corp.
SL Green Realty Corp. is an S&P 500 company that is the largest office landlord in Manhattan. Its primary function is that of a Real Estate Investment Trust (REIT) that focuses mainly on acquiring, managing, and maximizing the value of commercial properties located in and around the Manhattan area. SL Green currently holds interests in 90+ buildings that total over 38 million square feet. This includes both ownership interests as well as debt and preferred equity investments. This company is the Hype Asset of the Day today because its hype has increased by around 85% since yesterday. In this article, we shall analyze the positive stock hype and the negative stock hype to analyze why this is the case.
There are several reasons for the positive stock hype, including:
The latest skyscraper built by SL Green, called OneVanderbilt, has just reported that over 95.2% of it has been leased. This bodes well for the company as a whole since this was one of their largest undertakings in the face of a pandemic.
The company’s willingness to lend office space to cryptocurrency miners and firms has given it a distinct advantage over its competition and increased its potential tenancy pool. For example, a significant portion of the tenants of OneVanderbilt are also crypto mining firms.
The firm has recently announced that it is increasing dividends for the 11th year in a row, which indicates that the management is confident about the future growth prospects of the company.
The company has also indicated that it is bullish on the city of Manhattan by doubling down during the pandemic, a move that has since paid off through increased leases and a higher growth potential for the company in the future.
The management has initiated stock buybacks and sold off stakes in buildings to indicate that they are confident about bullish future growth and are investing greater amounts of money into the company as well as into acquiring more properties.
There are several reasons for the negative stock hype, including:
Due to a growing and spreading culture of WFH in Manhattan, rental demands have reduced, which could put a dent in the future earnings of firms. While they have tried to make up for this by leasing to crypto mining firms, this might not be enough to make up for the shortfall, especially since a majority of the leases that SL Green has expire in 2022, which could cause trouble for the firm.
The latest financial reports show that revenue is down 20% YoY, which has been attributed to inflation as well as residual concerns from COVID.
The company has very high levels of debt and is highly leveraged, which could become a major problem if the leases expiring this year are not renewed.
In general, while there is a lot of positive and negative stock hype, the positive hype seems to be stronger than the negative hype. The growth of the REIT industry, fueled by the leasing to cryptocurrency firms, robust financial performance, and Manhattan opening up after COVID will fuel the way to massive profitability for SL Green. While they do face some issues in terms of their leases and debt levels, this could easily be sorted out through a renewal of the leases, which would give them a dependable source of cash for the foreseeable future. All of this combined means that the stock is highly likely to see an uptick in its price over the next few trading sessions.
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