[Updated 03/31/2021] Boston Properties Update
We believe Boston Properties (NYSE: BXP) stock has a potential upward of 40% over the next one to two years, once the majority of the U.S. population receives the Covid-19 vaccine and the rate infection is under control. This will likely lead to the reopening of office space, boosting demand in the commercial real estate rental markets. BXP, the developer, owner and manager of Class A office buildings in the United States, is currently trading at $ 103 and has gained 9% in value year-to-date. It traded at a pre-Covid high of $ 145 in February and is 29% below that level now. In addition, BXP stock was up 32% from a March 2020 low of $ 78, after the multibillion-dollar stimulus package announced by the U.S. government, which helped the stock market recover in to a large extent – the stock tracks the broadest markets (the S&P 500 is up about 80% from the March low). This is because investor sentiment is somewhat negative towards REITs (Real Estate Investment Trusts) like Boston Properties due to the continued impact of the Covid-19 crisis. Additionally, the company missed consensus estimates for revenue and earnings in its recently released fourth quarter results. He said total revenue of $ 665 million – down 12% year-on-year, mainly due to Covid-19-related declines consisting of write-offs related to rents payable and accounts receivable, a drop in revenue from lower parking and hotel occupancy rates. Likewise, BXP’s revenue declined 7% year-on-year to $ 2.76 billion full-year, mainly due to lower rental income due to a drop in new leases, a 32% drop in parking and other revenues and an 85% drop in hotels. income.
As more businesses switched to a work-from-home mode during the pandemic, new rental volumes suffered in 2020. Additionally, commercial tenants, who account for around 6% of total rented square feet , have been seriously affected by the Covid. 19 crisis of the year, adversely affecting the segment’s rental collection and renewal rates. That said, Boston Properties’ Class A office portfolio is primarily focused on five markets – Boston, Los Angeles, New York, San Francisco and Washington, DC, totaling approximately 51.2 million square feet and comprised of 196 buildings of offices. Given the high-end locations of BXP properties, this makes them a prime choice for a Class A office environment. The same goes for 1.2 million square feet of new leases and renewals in the fourth quarter of the year. ‘year. New rental volume also saw some improvement during the quarter on a sequential basis, although it is still below the pre-Covid-19 level. Overall, we believe that the recovery of BXP revenues to pre-Covid-19 levels depends on the massive availability of the Covid-19 vaccine and on improving economic conditions. Despite some growth in BXP stock since the end of March, we believe the stock has strong upside potential in the near future, provided there is no sudden spike in Covid-19 cases leading to new lock restrictions. Our conclusion is based on our detailed analysis of Boston Properties stock market performance during the current crisis with that of the 2008 recession in an interactive dashboard analysis.
[Updated 11/30/2020] Boston Properties shares are up 40%
We believe Boston Properties (NYSE: BXP) stock has the potential to rise 42% in 1 to 1.5 years, once office space is fully opened and demand in rental markets for commercial properties will improve to pre-Covid levels. BXP is currently trading at $ 102 and it has lost 26% of its value since the start of the year. It traded at a pre-Covid high of $ 145 in February and is 29% below that level now. In addition, BXP stock is up 31% from the March 2020 low of $ 78, after the multibillion dollar stimulus package announced by the U.S. government, which largely helped the stock market recover. . The stock lags wider markets (the S&P 500 is up about 60% from the March low) as investors cautious about closing office space due to the Covid pandemic -19 and its impact on REITs (Real Estate Investment Trust) like Boston Properties.
The company develops, owns and operates a portfolio of primarily Class A offices in major markets including Boston, San Francisco and Washington, DC, totaling approximately 48.4 million square feet and comprising 164 office buildings. In response to the recent crisis, companies have adopted the work-from-home model to continue their operations. This has led to a drop in demand in the commercial rental space. The same is evident from a decline in BXP’s cumulative revenue for the first three quarters of 2020 – down 5% year-on-year. However, the strengths of employees in offices are likely to improve once a vaccine is made available to the public, resulting in high demand for its properties. Despite some growth in the BXP stock since late March, we believe the stock has room for growth in the near future, provided there is no sudden spike in Covid-19 cases leading to further restrictions. lock. Our conclusion is based on our detailed analysis of Boston Properties stock market performance during the current crisis with that of the 2008 recession in an interactive dashboard analysis.
Coronavirus crisis 2020
- 12/12/2019: Coronavirus cases first reported in China
- 01/31/2020: WHO declares global health emergency.
- 02/19/2020: Signs of effective containment in China and hopes of monetary easing from major central banks help S&P 500 reach record high
- 03/23/2020: S&P 500 34% drop of the maximum level observed on February 19, as cases of Covid-19 accelerate outside China. It doesn’t help that oil prices collapse in mid-March amid a Saudi-led price war
- From 03/24/2020: S&P 500 recovers 62% since lows on March 23, as the Fed’s multibillion-dollar stimulus package removes short-term survival anxiety and puts liquidity into the system.
In contrast, here is how BXP and the market as a whole fared during the 2007/2008 crisis.
Timeline of the 2007-08 crisis
- 1/10/2007: Approximate pre-crisis peak of the S&P 500 index
- 9/1/2008 – 10/1/2008: Accelerated decline in the market corresponding to Lehman’s bankruptcy filing (09/15/08)
- 03/01/2009: Approximate low of the S&P 500 index
- 1/1/2010: Initial recovery to levels before the accelerated decline (around 9/1/2008)
Boston Properties vs S&P 500 Performance on the 2007-08 Financial Crisis
The stock of BXP went from levels of around $ 108 in October 2007 (the pre-crisis high) to around $ 37 in March 2009 (as markets bottomed out), implying that the stock has lost up to 66% of its value compared to its approximate value before the crisis. peak of crisis. This marked a steeper decline than the larger S&P, which fell about 51%.
However, BXP rebounded sharply from the 2008 crisis to around $ 67 in early 2010 – an 81% increase between March 2009 and January 2010. In comparison, the S&P rebounded by around 48% over the same period.
Boston Properties Fundamentals Over The Past Years Look Strong
Boston Properties’ revenue grew 20% from $ 2.5 billion in 2015 to $ 3 billion in 2019. However, the company’s adjusted net income fell from $ 572.6 million to $ 511 million. dollars over the same period, mainly due to revenue from the sale of real estate assets in 2015. The company’s third quarter 2020 revenue was 7% lower than the previous year, reducing its EPS from $ 0.70 to $ 0.58.
Does Boston Properties have sufficient cash cushion to meet its obligations during the coronavirus crisis?
Boston Properties’ total debt grew from $ 9.3 billion in 2016 to $ 12.6 billion at the end of the third quarter of 2020, while its total cash flow fell from $ 356.9 million to around $ 1. $ 7 billion over the same period. The company generated around $ 782.4 million in cash from operations in the first nine months of 2020, and if its cash position deteriorates further, it will be difficult for the company, based on the numbers.
Phases of the Covid-19 crisis:
- From early to mid-March 2020: Fear of the rapidly spreading coronavirus epidemic results in reality, with an acceleration in the number of cases worldwide
- End of March 2020 and beyond: social distancing measures + lockdowns
- April 2020: Nourished stimulation suppresses short-term survival anxiety
- May-June 2020: Resumption of demand, with the gradual lifting of lockdowns – no more panic despite a steady increase in the number of cases
- July-October 2020: Weak Q2 and Q3 results, but continue demand improvement and advances in vaccine development are strengthening market sentiment.
Given the trajectory over 2009-10, this suggests a potential recovery to around $ 145 (42% up) once economic conditions start showing signs of improvement, provided there is no further deterioration of its debt situation. This marks a full recovery to Boston Properties’ stock level of $ 145 before the coronavirus outbreak gained global momentum.
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