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On Monday, Evercore ISI adjusted its stance on ProLogis (NYSE:), downgrading the inventory from Outperform to In Line and setting a value goal of $136.00. The agency cited a mixture of things, together with the inventory’s efficiency relative to the RMZ index for the reason that starting of the 12 months and a scarcity of main near-term catalysts, as causes for the downgrade.
For the reason that investor day on December 13, 2023, ProLogis has seen a 7.2% enhance in its inventory value, in comparison with a 3.4% enhance in the true property funding belief (REIT) sector. Regardless of this, Evercore ISI factors out that the inventory’s year-to-date efficiency has solely stored tempo with the index, and different shares have materially lagged behind since January 1st.
The report acknowledges the normalization of business demand within the U.S. and a slowdown in GDP development post-COVID. ProLogis’s occupancy fee was famous at 96.8% within the first quarter of 2024, a slight lower from 97.1% within the fourth quarter of 2023. The agency additionally talked about elevated exercise in giant warehouse areas, notably in Southern California, however indicated that the timing of lease signings is unsure.
Evercore ISI doesn’t anticipate important contributions from ProLogis’s enterprise into knowledge facilities to the corporate’s financials in 2024. As an alternative, it expects this initiative to reinforce funds from operations (FFO) development in 2026 and past. The agency stays optimistic in regards to the long-term prospects of ProLogis and the economic sector, noting potential for prime single-digit web working revenue development and roughly 11% FFO per share development, excluding promotes, over the following a number of years.
Concluding its evaluation, Evercore ISI identified that ProLogis is presently buying and selling at 27 occasions the agency’s projected 2024 adjusted funds from operations (AFFO) estimate and round 23 occasions the 2025 AFFO estimate. The agency means that important inventory value appreciation would require upward revisions to estimates, which they discover unlikely on the present valuation.
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