Is Now A Good Time To Buy Boston Properties?

Buying stocks low and selling high is what makes for successful investing, especially if dividends are added to the appreciation to create a substantial total return. 

But buying low may entail some risk. You must ask, “Why is this stock selling off and what does the future likely hold for this stock?”

Often the stock is part of an out-of-favor sector for one reason or another. Such is the case with real estate investment trusts (REITs), which have struggled as inflation has pushed the Federal Reserve to raise interest rates several times.

Take a look at one REIT whose share price has taken a beating over the past few weeks and see whether now is a good time to purchase it for a long-term hold.

Boston Properties Inc. BXP is a Boston-based office REIT with 194 properties concentrated in the six largest cities from Boston to Seattle. The firm calls itself “the largest publicly traded developer, owner and manager of premier workplaces in the United States.” Its 54.1 million square feet of space is 88.6% leased with a weighted-average lease term of 7.7 years. Many of its properties are rated as premier quality and located in highly desirable areas of the cities.

Last year was difficult for Boston Properties, and its total return was negative 40.39%. This year has been much the same story, with a total return of negative 23.3% as of March 17.

Office REITs have been extremely volatile. January was a great month for the office subsector as a whole, and Boston Properties was up 11.89%. But the share price peaked on Feb. 2, and it’s been downhill since. Fears of recession and increasing office vacancies have weighed heavily on Boston Properties.

Boston Properties has demonstrated a stable, if not exciting, dividend history. The dividend has grown 22.5% over the past five years and was never cut during the COVID-19 pandemic. But the dividend has not increased since December 2019.

The 52-week range on Boston Properties is $50.18 to $133.11. Shares hit 52-week lows this past week and could go even lower this week. Does it make sense to try to grab a bargain now, or is Boston Properties the proverbial “falling knife” that needs more time to bottom before it’s safe to purchase? Here are some recent developments.

On Jan. 31, Boston Properties reported fourth-quarter funds from operations (FFO) of $1.86, up 20% from $1.55 in the fourth quarter of 2021 and 2 cents above Wall Street estimates. Revenue of $789.8 million was 8% higher than $731.06 million in the fourth quarter of 2021 and $15.54 million ahead of expectations.

Forward guidance on first-quarter 2023 FFO in a range from $1.66 to $1.68 was below the consensus of $1.76 and full-year 2023 FFO guidance of $7.08 to $7.18 was less than the $7.21 consensus and below the previous full-year guidance of $7.15 to $7.30.

Analysts’ views on Boston Properties have been mixed as well. In early January, Deutsche Bank AG downgraded the REIT from Buy to Hold, while reducing the price target from $91 to $74. On March 16, Wells Fargo lowered its price target on Boston Properties from $76 to $64, while maintaining its Overweight rating on the stock.

But on Feb. 3, Morgan Stanley analyst Ronald Kamdem raised his price target on Boston Properties from $65 to $68, while maintaining an Equal-Weight rating on the shares. And on March 17, Ford Equity Research upgraded its rating on Boston Properties from 3 to 2.

There have also been some positive recent developments. On March 15, Boston Properties Director Matthew J. Lustig purchased 10,000 shares of Boston Properties stock for $529,200. The share price is now lower than what the insider paid.

On March 20, Boston Properties announced that its board of directors declared a regular quarterly dividend of $0.98 per share payable on April 28 to shareholders of record as of the close on March 31. This was in line with the previous quarterly dividend. The present annual dividend of $3.92 now yields 7.67%.

Despite the negative views on office REITs and the falling share price, the board did not cut the dividend, and at least one company insider is now buying shares.

Technically, the stock looks very oversold, with the 14-period relative strength index (RSI) at 20 and the stochastic at 12. But the stock has been falling on heavy volume for the past week.

Adding it all up, it seems that the share price may have a little bit further to fall, but Boston Properties seems to be reaching a selling climax that could render it a terrific long-term bargain before first-quarter earnings are announced on May 1. 

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