In a report released today, John Kim from BMO Capital downgraded Prologis (PLD – Research Report) to a Hold, with a price target of $112.00.
John Kim has given his Hold rating due to a combination of factors, including Prologis’s current performance and market conditions. The company’s stock underperformed year-to-date, and it faces ongoing challenges with an unclear demand outlook. Prologis’s net absorption rate has significantly declined by 74% year-over-year, which is a key indicator that can affect both market rents and the company’s stock price. Moreover, other revenue streams within Prologis’s business, such as third-party asset management fees and profits from development, are showing signs of weakness. Kim acknowledges that his assessment might change if there is an improvement in demand or if Prologis accelerates its growth in essential services and data center conversion profits.
Additionally, Kim points to a demand-supply imbalance, noting Prologis’s atypical decision to lower its forecast for future financial performance, including funds from operations (FFO) and same-store net operating income (NOI). This revision reflects the company’s anticipation of a tenant shift towards cost containment, which has already impacted leasing activities. The first quarter of the year saw a 12% drop in leasing, and industrial demand experienced a steep decline. This was attributed to factors such as higher inventory holding costs, economic uncertainty, and increased rents. With a considerable amount of new supply set to enter the market, vacancy rates are projected to rise, and a significant portion of Prologis’s assets are in size categories that are expected to see an influx of new competition.
In another report released on April 18, Evercore ISI also maintained a Hold rating on the stock with a $123.00 price target.
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Prologis (PLD) Company Description:
Prologis, Inc. is a real estate investment trust which is engaged in the logistics real estate business. The company owns, operates and develops industrial real estate, with a focus on the consumption side of the global supply chain.
