Shares of Prologis, Inc. (NYSE:PLD) closed Thursday’s trading almost 3% lower after the company reported third-quarter results. With the stock underperforming the broader REIT rally, the pullback offers a "compelling entry point," according to BTIG analyst Thomas Catherwood.
The Prologis Rating: Catherwood maintained a Buy rating and price target of $170.
The Prologis Thesis: The company reported fourth-quarter FFO guidance of $1.54 per share. That’s 3 cents below consensus.
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Despite broader market jitters around the correction in AI and data center stocks, Prologis’ conservative outlook reflects rate volatility rather than weakening industrial fundamentals.
U.S. demand remains strong. The analyst said the company posted about 63 million square feet of positive absorption, vacancy down 10 basis points (bps) to 7.1%, and rent up 50 bps sequentially. Europe was even stronger, with 70 bps of sequential rent growth, he added.
The company is now raising rents in around 30% of its markets. That’s up from about 10% a year ago. The strongest performance is in regions like Dallas, Atlanta, Phoenix, Northern California, Brazil, and the Netherlands, Catherwood said.
Recent development challenges, such as Oracle Corp’s (NASDAQ:ORCL) Force Majeure on a 2.45-GW project and rising bond yields for CoreWeave Inc (NASDAQ:CRWV), has raised doubts around the viability of data center projects, the analyst stated.
"That said, we view PLD’s development track record, strict pre-leasing requirements (680 MW of fully leased projects under construction and 1 GW under LOI), and sector-leading access to capital as ample defenses against the missteps of other data center developers," he further wrote.
Catherwood expects Prologis to generate above-average earnings growth, driven by accelerating rent growth and "outsized investment opportunities."
PLD Price Action: Prologis shares rose 0.28% to $127.29 at the time of publication on Friday.
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