Sunstone Hotel Investors Inc. is Setting Up for a Big Move – June 2, 2021

Sunstone Hotel Investors Inc. (SHO) is a real estate investment trust that acquires, owns, manages, and renovates the full-service hotel and select-service hotel properties across various states in the United States. The company’s portfolio consists primarily of urban, upper-upscale hotels managed under Marriott, Hilton, Fairmont, and Sheraton brands.

The company has been bouncing back from the pandemic as the company has seen recent acceleration in bookings across all its business segments. For instance, four of the company’s hotels including Oceans Edge, Chicago Embassy Suites, Hyatt Chicago and Wailea Beach Resort achieved higher room rates in the most recent quarter than in the first quarter of 2019.

While the company only had $320 million in cash as of the most recent quarter, it has almost no short-term debt. Recent sales growth is down, but sales are expected to soar 310% in the current quarter and earnings are forecasted to rise 60%. The stock appears undervalued with a trailing P/E of 15.94, but is up 43% over the past year.

Take a look at the 1-year chart of SHO below with added notations:

Chart of SHO provided by TradingView

SHO has moved into a sideways trading range and in a rectangle pattern over the past few months. While in the range, the stock has formed a resistance level at around $13.50 (red), and a level of support at $12 (green).  SHO is now sitting in between those marks, but at some point the stock will have to either break the resistance or the support.

The possible long positions on the stock would be either on a pullback to $12 or on a breakout above $13.50. The ideal short opportunity would be on a break below $12.

Author: Christian Tharp, CMT