On Monday, Baird analyst David Rodgers upgraded ProLogis (NYSE:PLD) shares, listed on the New York Stock Exchange (NYSE:PLD), from Neutral to Outperform, while slightly lowering the price target to $123 from $124.
Rodgers acknowledged the near-term challenges facing the company, such as the impact of tariff uncertainty on demand and a high supply expected to continue throughout 2025, which could lead to increased vacancy rates. Despite these concerns, Rodgers believes that the current share price adequately reflects these risks.
Rodgers anticipates an improvement in demand dynamics in the latter half of the year, projecting a return towards the pre-pandemic trendline. He notes that the fundamental demand drivers for ProLogis's sector remain strong. With this outlook, even with only modest rent growth over the next five years, Rodgers expects ProLogis to maintain a consistent 4% or higher growth in GAAP Same-Store Net Operating Income (SSNOI).
The analyst's projection includes a five-year Total (EPA:TTEF) Return Compound Annual Growth Rate (TR CAGR) of nearly 14%. This growth expectation is based on the assumption that the demand for ProLogis's services will rebound as the year progresses, offsetting the initial risks and contributing to the company's long-term financial performance.
Rodgers's upgrade reflects a positive outlook on ProLogis's ability to navigate through the current market uncertainties. The slight decrease in the price target from $124 to $123 accompanies the upgrade, suggesting a nuanced view of the company's valuation amid the anticipated market conditions.
Investors and market watchers will be keeping a close eye on ProLogis as it strives to achieve the performance levels anticipated by Baird's analysis in the face of ongoing economic challenges and sector-specific headwinds.
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