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On Friday, Citi initiated coverage on Lineage Inc (NASDAQ:LINE), a real estate investment trust specializing in cold storage, with a Neutral stock rating and a $64.00 price target. Currently trading at $59.88 with a market capitalization of $15.2 billion, Lineage offers investors a 3.52% dividend yield. According to InvestingPro analysis, the company appears overvalued at current levels. The initiation reflects a measured outlook for the company, which operates two main business segments: global warehousing and global integrated solutions.
The global warehousing segment of Lineage provides storage and related services to its customers. Meanwhile, the global integrated solutions division is focused on facilitating the movement of products throughout the food supply chain. The company generated revenue of $5.34 billion in the last twelve months, though InvestingPro data reveals challenges with profitability, as shown by negative earnings per share of -$3.70.
Citi analysts highlighted several positive aspects of Lineage’s business, including the company’s scale, market share benefits, opportunities for external growth and consolidation, and long-term tailwinds driven by the increasing demand for fresh and frozen foods.
Despite these advantages, the analysts also noted several challenges that Lineage faces. The company’s business is operationally intensive and generally yields lower margins compared to traditional industrial REITs. Lineage also has a large workforce, which could lead to potential labor-related headwinds. Additionally, concerns were raised regarding the demand for cold storage space, a generally tepid demand environment, and the risks associated with global exposure, including foreign exchange (FX) risks.
The Neutral rating suggests that while Lineage has potential for growth and market presence, the aforementioned concerns may temper expectations for the company’s performance in the near term. The $64.00 price target set by Citi provides a benchmark for investors to consider when evaluating the company’s stock.
In other recent news, Lineage Inc. reported flat revenue for 2024, maintaining a total of $5.34 billion. Despite the stagnant revenue, the company projects growth in adjusted EBITDA for 2025, estimating a range between $1.35 billion and $1.4 billion. Lineage has also declared a quarterly dividend of $0.5275 per share for the first quarter of 2025, emphasizing its commitment to shareholder value. Analyst firms have adjusted their outlooks following the earnings report; RBC Capital Markets reduced the price target for Lineage to $74 while maintaining an Outperform rating, citing a slower pace of near-term organic growth and investments. Similarly, Goldman Sachs lowered its price target to $71 but upheld a Buy rating, highlighting the company’s potential to outperform its peers within the Real Estate Investment Trust sector. Lineage’s innovative linOS system, which has surpassed efficiency expectations in its pilot phase, is anticipated to drive future growth. Investors are closely monitoring Lineage’s performance, particularly as the company continues to deploy capital strategically and enhance its technological capabilities.
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