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Sunstone Hotel Investors (SHO)
NYSE:SHO

Sunstone Hotel (SHO) AI Stock Analysis

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Sunstone Hotel

(NYSE:SHO)

Rating:61Neutral
Price Target:
$9.50
▲(6.50%Upside)
Sunstone Hotel's overall stock score of 61 reflects a stable financial position and positive earnings outlook, tempered by technical challenges and high valuation concerns. The company's strong balance sheet and operational efficiencies are positive factors, but the high P/E ratio and macroeconomic uncertainties present notable risks.
Positive Factors
Acquisition Interest
Sunstone Hotel Investors received interest in being acquired by Trinity Investments at a significant premium to its recent trading price.
Financial Stability
The company has the second lowest leverage in its group, which is favorable for its financial stability.
Revenue Performance
Sunstone Hotel Investors reported stronger total revenues and RevPAR in the fourth quarter, coming in above market estimates and consensus.
Negative Factors
Guidance Concerns
Sunstone Hotel Investors' 2025 EBITDA guidance came in below consensus, potentially putting pressure on the stock.
Labor Impact
The company's fourth-quarter EBITDA margins were lower, impacted by labor activity, which led to weaker margins despite strong revenue performance.
Union Negotiation Disruption
There is pressure from union negotiation disruption in San Diego, which could impact operations.

Sunstone Hotel (SHO) vs. SPDR S&P 500 ETF (SPY)

Sunstone Hotel Business Overview & Revenue Model

Company DescriptionSunstone Hotel Investors, Inc. is a lodging real estate investment trust (REIT) that as of the date of this release has interests in 19 hotels comprised of 9,997 rooms. Sunstone's business is to acquire, own, asset manage and renovate or reposition hotels considered to be Long-Term Relevant Real Estate®, the majority of which are operated under nationally recognized brands, such as Marriott, Hilton and Hyatt.
How the Company Makes MoneySunstone Hotel (SHO) generates revenue primarily through the ownership and operation of hotel properties. The company's key revenue streams include room bookings, food and beverage services, and event hosting at their hotels. Additionally, SHO benefits from strategic partnerships with major hotel brands, which enhance guest loyalty and occupancy rates. The company also seeks to increase profitability by optimizing operational efficiencies and capitalizing on market trends in the hospitality industry.

Sunstone Hotel Earnings Call Summary

Earnings Call Date:May 06, 2025
(Q1-2025)
|
% Change Since: 5.06%|
Next Earnings Date:Aug 06, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted strong performances in specific markets and successful hotel conversions, with a robust share repurchase strategy. However, challenges in Wailea and San Diego, macroeconomic uncertainties, and the delayed opening of Andaz Miami Beach tempered the outlook.
Q1-2025 Updates
Positive Updates
Strong Performance in Specific Markets
The inauguration in Washington D.C. drove a 24% increase in RevPAR, and hotels in New Orleans grew RevPAR by 25% due to the Super Bowl. San Francisco experienced a 9% RevPAR growth due to a better citywide calendar.
Successful Hotel Conversions and Openings
The Andaz Miami Beach opened on May 3, expected to deliver growth. The Marriott Long Beach Downtown posted a 145% increase in RevPAR. The company is excited about the Andaz Miami Beach's potential for 2026 and beyond.
Robust Share Repurchase and Strong Balance Sheet
Sunstone repurchased $21 million of stock at $8.90 per share. The balance sheet remains strong with net leverage, including preferred equity, at 4.5x trailing EBITDA. Total liquidity equates to nearly $650 million.
Positive Outlook for San Francisco and Wailea
San Francisco showed strong business transient demand, with positive sentiment and strong pace growth expected in future years. Wailea Beach Resort's group production was up nearly 20% in the first quarter compared to the prior year.
Negative Updates
Challenges in Wailea and San Diego Markets
Softer-than-expected performance in Wailea due to recovery from fires and Kaanapali reopening. San Diego experienced less robust transient demand, impacting first-quarter results.
Macroeconomic Uncertainty and Limited Forward Visibility
Operating fundamentals moderated due to macroeconomic uncertainty and declining business and consumer confidence, leading to a cautious full-year outlook adjustment.
Delayed Opening of Andaz Miami Beach
The opening of Andaz Miami Beach was delayed, affecting expected EBITDA contributions for the year, with a revised projection of $6-7 million in EBITDA.
Company Guidance
During the Sunstone Hotel Investors First Quarter 2025 Earnings Call, the company provided updated guidance for the year, reflecting some adjustments to their financial outlook. The revised outlook anticipates total portfolio RevPAR growth between 4% and 7% compared to 2024, with adjusted EBITDAre expected to range from $235 million to $260 million. Adjusted FFO per diluted share is forecasted to lie between $0.82 and $0.94, translating to annual growth rates of 8% for EBITDA and 10% for FFO. The opening of the Andaz Miami Beach, though slightly delayed, is expected to contribute significantly to earnings, particularly in the fourth quarter. The company also discussed the impact of macroeconomic uncertainty on certain markets, such as Wailea and San Diego, and highlighted their capital recycling strategy, including potential asset sales to fund share repurchases, which have already amounted to $21 million at a blended repurchase price of $8.90 per share.

Sunstone Hotel Financial Statement Overview

Summary
Sunstone Hotel exhibits stable financial health with strong operational efficiency and a conservative approach to leverage. The company maintains a solid equity position but faces challenges in enhancing profitability and cash flow growth. Continued focus on improving margins and cash conversion will be crucial for sustaining growth in the competitive REIT hotel and motel industry.
Income Statement
65
Positive
The income statement shows moderate performance. The TTM gross profit margin is 54.77% and the net profit margin is 3.85%, both indicating stable profitability. Revenue growth is slightly positive at 1.86% from the previous year, suggesting slow growth. EBIT and EBITDA margins of 11.80% and 22.70% respectively, indicate healthy operational efficiency, though there is room for improvement in net profitability.
Balance Sheet
70
Positive
The balance sheet reveals a strong equity position with an equity ratio of 67.11%, indicating financial stability. The debt-to-equity ratio is 0.41, reflecting a conservative leverage approach. However, the return on equity (ROE) is low at 1.71%, suggesting that the company is not fully leveraging its equity to generate higher profits.
Cash Flow
68
Positive
The cash flow statement indicates a robust free cash flow to net income ratio of 4.62, suggesting strong cash generation relative to earnings. However, the operating cash flow to net income ratio of 4.62 highlights potential issues in converting earnings into cash. The free cash flow growth rate is negative, showing a 3.79% decline from the previous year, which could be a concern for future liquidity.
BreakdownTTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue922.71M905.81M985.98M912.05M509.15M267.91M
Gross Profit505.31M421.74M476.46M463.50M218.18M16.22M
EBITDA209.49M203.64M387.31M249.23M43.24M-107.06M
Net Income35.48M43.26M206.71M87.29M34.30M-410.51M
Balance Sheet
Total Assets2.92B3.11B3.15B3.08B3.04B2.99B
Cash, Cash Equivalents and Short-Term Investments320.27M107.20M426.40M101.22M120.48M368.41M
Total Debt788.43M853.07M831.29M827.04M634.55M790.31M
Total Liabilities885.06M1.00B982.68M997.86M801.27M896.34M
Stockholders Equity1.99B2.10B2.17B2.08B2.20B2.05B
Cash Flow
Free Cash Flow163.92M170.38M198.13M80.81M-35.29M-116.81M
Operating Cash Flow163.92M170.38M198.13M209.38M28.37M-116.70M
Investing Cash Flow-386.73M-386.28M258.08M-165.72M-239.69M113.79M
Financing Cash Flow-99.39M-97.52M-119.72M-49.17M-42.10M-445.92M

Sunstone Hotel Technical Analysis

Technical Analysis Sentiment
Positive
Last Price8.92
Price Trends
50DMA
8.61
Positive
100DMA
9.13
Negative
200DMA
9.93
Negative
Market Momentum
MACD
0.03
Negative
RSI
57.03
Neutral
STOCH
62.31
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SHO, the sentiment is Positive. The current price of 8.92 is above the 20-day moving average (MA) of 8.71, above the 50-day MA of 8.61, and below the 200-day MA of 9.93, indicating a neutral trend. The MACD of 0.03 indicates Negative momentum. The RSI at 57.03 is Neutral, neither overbought nor oversold. The STOCH value of 62.31 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for SHO.

Sunstone Hotel Risk Analysis

Sunstone Hotel disclosed 63 risk factors in its most recent earnings report. Sunstone Hotel reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

Sunstone Hotel Peers Comparison

Overall Rating
UnderperformOutperform
Sector (63)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
PEPEB
69
Neutral
$1.23B-0.33%0.38%2.18%56.00%
XHXHR
69
Neutral
$1.28B58.081.83%4.30%3.57%12.66%
PKPK
69
Neutral
$2.13B17.953.46%9.26%-3.68%35.35%
DRDRH
66
Neutral
$1.65B40.453.22%4.01%3.73%-44.49%
RLRLJ
64
Neutral
$1.14B28.692.92%7.96%2.82%-8.08%
63
Neutral
$6.98B18.97-1.16%6.86%4.65%-25.28%
SHSHO
61
Neutral
$1.76B91.421.66%4.07%-3.90%-89.21%
* Real Estate Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
SHO
Sunstone Hotel
8.92
-0.87
-8.89%
DRH
Diamondrock
7.98
0.19
2.44%
PEB
Pebblebrook Hotel
10.53
-2.54
-19.43%
RLJ
RLJ Lodging
7.54
-1.13
-13.03%
XHR
Xenia Hotels & Resorts
13.17
-0.14
-1.05%
PK
Park Hotels & Resorts
10.80
-2.18
-16.80%

Sunstone Hotel Corporate Events

Executive/Board ChangesShareholder MeetingsStock BuybackBusiness Operations and StrategyFinancial Disclosures
Sunstone Hotel Opens Renovated Andaz Miami Beach
Neutral
May 6, 2025

On May 1, 2025, Sunstone Hotel Investors held its Annual Meeting of Stockholders, where key decisions included the election of directors and the approval of executive compensation and audit appointments. The company reported a decrease in net income for the first quarter of 2025 compared to the previous year, but saw increases in RevPAR and Adjusted EBITDAre. Sunstone opened the newly renovated Andaz Miami Beach, marking a significant milestone in its portfolio enhancement strategy. The company also continued its stock repurchase program and extended a term loan maturity, reflecting its focus on financial flexibility and shareholder returns.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Jul 02, 2025