Safehold, Inc. (SAFE) enables real estate owners to unlock the value of the land beneath their properties through its ground lease solution. Its Q2 results fell short of the Street’s consensus on both top line and bottom line fronts.
Let’s take a look at the company’s financial performance and what has changed in its key risk factors that investors should be aware of.
On the back of higher interest income from sales-type leases during the quarter, Safeholds’s revenue increased to $44.2 million versus $37.4 million a year ago, but lagged analysts’ estimate of $45.6 million.
The Chairman and CEO of Safehold, Jay Sugarman, said, “During the second quarter, Safehold grew its portfolio by over $200 million, while innovatively expanding its suite of products to capture pre-development opportunities…With ample liquidity on hand, a robust pipeline, and a lower cost of capital, Safehold is well-positioned to continue to drive growth and deliver modern ground lease capital to a broader customer base.”
Despite total costs and expenses increasing $4.7 million year-over-year to $30.4 million, earnings per share improved to $0.28 from $0.24 a year ago, but missed consensus by $0.05. (See Safehold stock chart on TipRanks)
Following Safehold’s Q2 performance, B. Riley Financial analyst Matthew Howlett reiterated a Buy rating on the stock, while increasing the price target to $110 from $100.
In a research note to investors, the analyst said, “Safehold’s announced approximately a $500M pipeline which is long-tailed in nature but will be a boost to portfolio growth once closings begin and be another source of flow.”
Based on 1 Buy and 3 Holds, consensus on the Street is a Hold. The average Safehold price target of $90 implies that the stock is fairly priced at current levels. Shares have gained 25% so far this year.
Now, let’s look at what’s changed in the company’s key risk factors profile.
According to the new Tipranks Risk Factors tool, Safehold’s two main risk categories are Finance & Corporate and Production, which account for 63% and 21%, respectively, of the total 48 risks identified. Since June, the company has added one new key risk factor.
Under the Finance & Corporate category, the company highlights that its borrowing costs and access to debt capital markets depend on its credit ratings which, in turn, are based on its operating performance, prospects, and other factors.
While Safehold’s present credit ratings are investment grade, there can be no assurance that these may not be lowered in the future. Any such downgrade could have an impact on Safehold’s borrowing costs, ability to raise capital, liquidity and share price.
The Finance & Corporate risk factor’s sector average is at 59%, compared to Safehold’s 63%.