Truist Securities sets stock price target on Lineage, cites growth

On Monday, Truist Securities began its coverage of Lineage Inc (NASDAQ: LINE) shares, issuing a Buy rating and establishing a price target of $94.00.

The firm highlighted several factors contributing to Lineage's strong growth profile, including the potential for mid-single to high-single digit internal same-store net operating income (SSNOI) growth coupled with external growth, which could result in high-single digit adjusted funds from operations (AFFO) per share growth potential. This outlook is particularly optimistic as the food sector continues to recover.

Lineage's aggressive expansion strategy was also underscored, noting the company's $11.7 billion in acquisitions and $1.6 billion in development since 2018. With a history of 115 acquisitions since 2008, nearly 100 owners have reinvested $644 million of equity into Lineage, demonstrating a strong buy-in. Development remains a key focus for the company.

The firm also emphasized Lineage's market leadership and efficiency, holding a 12% global share in a complex, labor-intensive industry. Lineage's EBITDA margins for 2023 stand at 24%, compared to its competitor, Americold Realty Trust (NYSE:COLD), with 21%. Moreover, Lineage's assets average 22 years in age and feature more automation, with 16% of their facilities, in contrast to Americold's average asset age of 37 years.

Truist Securities praised Lineage's technology investments, which have totaled $738 million since 2019. The company's advanced tracking, reporting, and inventory management tools are seen as particularly impressive, with expectations that its Geographic Information System (GIS) can grow at a mid-teens rate. Notably, Lineage has not experienced any major cyber incidents.

Lastly, the firm pointed to the deep management bench and alignment of interests at Lineage. Founders play an active role in the company, and insider ownership stands at 15-20%. Compensation is closely tied to performance, aligning management's interests with those of shareholders.

In other recent news, Lineage Inc has been the focus of multiple analyst firms. UBS initiated coverage on Lineage with a neutral stance, setting a price target of $88. This is based on the firm's anticipation of Lineage's operating metrics and Adjusted Funds From Operations (AFFO) growth in 2025.

Wells Fargo began coverage with an Equal Weight rating and a price target of $86, based on the firm's analysis of Lineage's fiscal year 2025 and 2026 AFFO estimates.

Mizuho started coverage on Lineage with a Neutral rating and a similar price target of $86, recognizing the company's significant scale and advanced technology utilization. Baird initiated coverage with an Outperform rating and a 12-month price target of $91, citing the company's substantial investment in its operating platform.

JPMorgan also initiated coverage, giving the stock an Overweight rating with a price target of $93, anticipating earnings growth in 2025 and 2026 driven by an increase in Net Operating Income (NOI) and cost-saving initiatives.

Goldman Sachs issued a Buy rating and a 12-month price target of $105, with similar expectations for earnings growth. Lineage has also recently fully repaid its senior unsecured term loan facility, which had an outstanding balance of approximately $2.4 billion, using proceeds from its initial public offering (IPO). This move is part of Lineage's strategy to reshape its capital structure, demonstrating robust financial management according to analysts.

InvestingPro Insights

As Lineage Inc (NASDAQ: LINE) garners a Buy rating from Truist Securities, key financial metrics and market signals from InvestingPro paint a detailed picture of the company's standing. With a market capitalization of $21.17 billion, Lineage is recognized as a prominent player in the Industrial REITs industry, according to an InvestingPro Tip.

Despite the company's aggressive expansion and technology investments, analysts, as highlighted by another InvestingPro Tip, do not expect Lineage to be profitable this year, and it has not been profitable over the last twelve months.

The company's financial health, as reflected by recent data, shows a Price to Earnings (P/E) Ratio of -83.78 and an even more pronounced adjusted P/E Ratio for the last twelve months as of Q1 2024 at -286.55. The Price to Book (P/B) ratio stands at 4.25, indicating that the stock is trading at a high valuation multiple relative to its book value. Moreover, Lineage is trading near its 52-week high, with the price at 93.47% of this peak, suggesting a strong market confidence as per the recent closing price of $83.98.

For investors seeking further insights and metrics, InvestingPro offers additional tips, including an analysis of the company's valuation multiples and growth prospects. These details, available at InvestingPro, can provide a deeper understanding of Lineage's financial position and market potential.

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