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Why Safehold Stock Is Up 20% in March Already After Surging 22% in February

By Beth McKenna - Mar 6, 2020 at 9:18AM

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Shares of the REIT are bucking the coronavirus-driven market sell-off.

What happened

Shares of Safehold Inc. (SAFE 3.75%), a real estate investment trust (REIT) that specializes in commercial property ground leases, surged 21.5% in February, according to data from S&P Global Market Intelligence.

For context, the S&P 500 index dropped 8.2% last month. The market's sell-off was driven by concerns that the fast-spreading novel coronavirus, COVID-19, could significantly negatively impact global economic growth.

Safehold stock is continuing its strong run in March. In the first four trading days of the month, through March 5, shares have soared 20%. That compares with the broader market's 2.4% return over this period. In 2020, Safehold stock has returned a whopping 66.8%, compared with the broader market's negative 6.1% return so far this year.

The company name might not strike a chord with many investors, as it's relatively new to the public markets. It held its initial public offering (IPO) in June 2017. 

The New York City skyline.

New York City, where Safehold is headquartered, is the company's largest and fastest-growing market. Image source: Getty Images.

So what

We can attribute Safehold stock's robust February and March (to date) performances largely to a continuation of the momentum that it's enjoyed for some time. Investors are enthused about the company's growth prospects.

Safehold reported its fourth-quarter results last month, but that event only accounts for a small portion of the stock's total February rise. Following the Feb. 13 earnings release, shares rose 2% -- on a flat market day -- and they gained 2.8% in the two-day period following the report.

In Q4, revenue rocketed 100% year over year to $29.6 million. Net income soared 156% to $11.2 million, which translated to earnings per share (EPS) rising 4.2% to $0.25. That result fell short of the $0.36 Wall Street consensus estimate. However, only three analysts provide projections, making the consensus less meaningful than usual. (The big difference in the percentage gain between net income and EPS is due to the sizable increase in the number of shares outstanding.) 

For full-year 2019, revenue increased 88% year over year to $93.4 million, and EPS rose 39% to $0.89.

Now what

I think investors can likely expect Safehold stock to continue to run up. During this coronavirus-driven turbulent market, many investors are shifting their portfolios to a more defensive stance. While Safehold doesn't pay a big dividend, it does pay one -- it's currently yielding 0.95%. Moreover, the company's portfolio doesn't have any international exposure, which is a plus with respect to COVID-19, as China and several other countries have been the hardest hit so far. 

Finally, this week's Federal Reserve emergency interest rate cut of a half a percentage point should benefit Safehold by lowering its borrowing costs.


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