Hudson Pacific Properties Inc. is enjoying a recent upward trend in the price of its stock.
Shares of the Brentwood-based real estate investment trust that owns office buildings and studio soundstages have closed above $5 for the past two weeks.
That share price is anemic, however, when compared to the Aug. 12 closing of $13.88.
Zacks Equity Research attributed the recent price spike to a higher number of shares being traded than in a typical session. The volume was just more than 9 million, compared to the typical volume ranging from 2.3 million to 8.6 million shares traded.
“The increased optimism in the stock can be attributed to the recovering fundamentals of the U.S. office real estate market,” Zacks reported.
During Hudson’s first-quarter earnings conference call, which took place on May 10, Chief Executive Victor Coleman told analysts that recent announcements from big-tech firms, including Amazon.com Inc., Oracle Corp. and Lyft Inc., about bringing employees back to the office was a good sign.
“With the return to office unfolding slower than many expected, we remain cautiously optimistic that these announcements and related trends will translate into increased physical occupancy and improved tenant demand at our assets,” Coleman said.
On July 27, shares of Hudson closed at $5.69.
The company reported on May 9 a net loss of $20.4 million (-14 cents a share) for the quarter ending March 31, compared to a net loss of $19.8 million (-13 cents) in the same period of the previous year. Revenue increased 3.2% from the first quarter of the prior year to $252 million.
Harout Diramerian, Hudson’s chief financial officer, attributed the jump in revenue to Hudson’s acquisition last fall of Quixote Studios for $360 million. Quixote owns soundstages and provides trucks and expendable products to film and television productions.
Hudson will release its second-quarter earnings on Aug. 1.
In a research report from May 9, Alexander Goldfarb, a managing director and analyst with Piper Sandler & Co., referred to another major impact on Hudson’s finances – the strike by Hollywood writers.
He wrote that, after hearing management on the conference call, he was of the opinion that pent-up demand for studio space once the strike is settled represents a significant revenue upside, as production companies will need to “rapidly re-stock” the content pantry.
“While a prolonged strike could cause the major Hollywood companies to force more production back to owned studios, ultimately there will be too much demand, meaning (Hudson) should benefit,” Goldfarb said.
This was in contrast with office leases, which “remains lethargic, as there is no worry that space won’t be available tomorrow or the day after,” he added.
Coleman called the studio-related union strike both temporary and relatively infrequent – there have been seven strikes in Hollywood since the 1950s – and Hudson’s management believes the underlying fundamentals for content production — and thus for its studio business — remain solid.
“Even if spend on high-quality original content moderates in the coming years in pursuit of profitability, current estimates indicate it will be at least on par with last year’s following a period of ramp-up post-strike,” Coleman said during the call.
