Real estate specialist Harbor Custom Development (NASDAQ:HCDI) — which focuses on all aspects of the land development cycle — announced this morning that it’s one step closer to securing a deal for a 36-unit townhome project in Washington. HCDI stock jumped sharply on the news, gaining more than 200% at one point before settling at a gain of over 80% as of this writing. Still, shares of HCDI are a speculative prospect despite excitement from retail investors.
According to Harbor Custom’s press release, Kitsap Community Resources — which seeks to purchase the underlying townhome project called Mills Crossing — agreed to waive all contingencies regarding the proposed $14.25 million sale. Kitsap also released its $400,000 of non-refundable earnest money to the company. Harbor Custom Development anticipates closing the deal on or before June 16, 2023.
Harbor Custom Development President and CEO Sterling Griffin had the following to say in the press release:
“We are pleased to partner with Kitsap Community Resources on the sale of Mills Crossing, and excited about the chance to provide high-quality, affordable housing to families in Kitsap County.”
HCDI Stock Remains a Speculative Proposition
Notably, Harbor stated in the press release that tenants of Mills Crossing have “convenient access” to several amenities in the downtown area of Bremerton, where the townhome project is located. These amenities include “local shopping, farmer’s markets, waterfront parks, community restaurants, Olympic College, and convenient ferry service to Seattle.”
The two-bedroom, two-bathroom townhome rentals also average 1,425 square feet. That’s quite spacious relative to the national average. According to Statista, 2018-built two-bedroom apartments in the U.S. averaged 1,138 square feet. Therefore, substantive fundamentals undergird the usual marketing glitz, benefitting HCDI stock.
Despite the positive news today, though, shares of Harbor Custom Development remain deeply speculative. True, with today’s big move higher, HCDI stock is in the green on a year-to-date (YTD) basis. Naturally, that green ink is invigorating chatter among retail investors, too. However, in the trailing one-year period, shares of HCDI are still down more than 80%. What’s more, since its public debut in 2020, HCDI stock is down more than 90%. Therefore, investors should be cautious before considering shares.
Why It Matters
As of this moment, no analysts cover HCDI stock on TipRanks. This may be due in part to the underlying company’s rough financial profile. Investment resource Gurufocus identifies eight severe warning signs against Harbor Customs, including rising debt levels, declining revenue growth and distressed books that imply bankruptcy risk.
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On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.