On Monday, Jefferies made an adjustment to its financial outlook for Howard Hughes Holdings (NYSE:HHH), decreasing the price target to $80 from the previous $89. The firm continues to endorse the stock with a Buy rating. The reassessment by the analyst stems from the anticipated spin-off of Seaport Entertainment Group, which is now expected to occur in the third quarter.
The revision of the Sum of the Parts (SOTP) estimate was necessitated by the Seaport's performance, which has not lived up to expectations. This underperformance is attributed to slower-than-anticipated office leasing and the ramp-up of operating businesses. Despite these challenges, the analyst believes that the current stock price undervalues the Seaport assets.
The valuation of the Seaport by Jefferies is pegged at $5 in Net Asset Value (NAV), contributing to a total of $7 for all assets under Seaport Entertainment Group (SEG). The analyst also indicated that there is a potential upside for the Seaport assets. Upon the stabilization of key properties such as Pier 17 and 250 Water Street, the value could increase to a range between $7 and $22.
InvestingPro Insights
As Howard Hughes Holdings (NYSE:HHH) navigates through its anticipated spin-off of Seaport Entertainment Group, investors can gain additional perspective through InvestingPro data and tips. The company's significant debt burden and challenges in generating profit over the last twelve months may raise concerns about its ability to make interest payments on debt. However, analysts are still forecasting sales growth in the current year, which could be an indicator of potential recovery and growth prospects.
With a market capitalization of $3.37 billion and a negative P/E ratio, the company's valuation reflects investor skepticism about its current earnings capacity. Yet, the gross profit margin remains relatively healthy at 47.48%, suggesting that the company maintains a solid grip on cost management relative to its revenues. Additionally, with liquid assets surpassing short-term obligations, Howard Hughes Holdings exhibits financial flexibility, which could be crucial as it approaches the spin-off date and works to stabilize its properties.
For investors seeking a deeper dive into Howard Hughes Holdings' financial health and future outlook, there are additional InvestingPro Tips available at Investing.com/pro/HHH. Subscribers can utilize the coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking further insights that could inform investment decisions.
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