Alexandria Real Estate Equities Faces Challenges Amid Market Growth
Company Struggles to Keep Up with Broader Market Performance
With a market capitalization of $18.9 billion, Alexandria Real Estate Equities, Inc. (ARE) is a prominent urban office Real Estate Investment Trust (REIT) dedicated to developing and managing life science, agtech, and technology campuses in top innovation hubs across North America. The company aims to create dynamic environments that promote innovation, attract skilled professionals, and enhance long-term value for its varied tenant base.
Stock Performance Raises Concerns
Over the past year, shares of the Pasadena, California-based firm have lagged behind the overall market. While ARE has increased by 3.6% in the last 52 weeks, the S&P 500 Index ($SPX) has surged by 31%. In 2024, shares of ARE dipped 14.6%, contrasting with SPX’s impressive 25.2% gain year-to-date.
Furthermore, the life science real estate company has also underperformed against the Real Estate Select Sector SPDR Fund’s (XLRE) 21.9% return over the same period, and 10.1% year-to-date.
Mixed Quarterly Results Disappoint Investors
On October 21, the company reported better-than-expected Q3 revenue of $791.6 million. However, shares of ARE fell 1.3% the following day due to a slight miss on Adjusted Funds from Operations (AFFO), which came in at $2.37 per share, just below analyst forecasts. Investors expressed concern over anticipated occupancy pressure from upcoming tenant move-outs in Q4 and Q1, potentially impacting rental income until mid-2025. Additionally, concerns arose from the $1.2 billion in asset sales under the company’s asset recycling program, raising fears of dilution in near-term earnings.
Future Earnings Predictions and Analyst Ratings
For the current fiscal year ending in December, ARE is projected to report an FFO per share of $9.47, marking a year-over-year growth of 5.6%. The company’s earnings surprise record is varied, with two beats and two misses over the last four quarters.
Among the 14 analysts covering ARE, the consensus rating sits at a “Moderate Buy,” comprising four “Strong Buy” ratings and ten “Holds.” This is a downgrade from three months ago when there were seven “Strong Buy” ratings on the stock.
Recent Analyst Dowsngrade and Price Target Projections
On November 15, Deutsche Bank analyst Omotayo Okusanya downgraded Alexandria Real Estate to “Hold”, lowering the price target to $112 amid concerns surrounding the company’s earnings growth through 2025. This downgrade reflects expected occupancy pressures from move-outs and the anticipated impact of the $1.2 billion in asset sales on earnings in the immediate future.
Currently, the average price target stands at $129.62, suggesting a 19.7% premium to ARE’s current level. The highest target of $186 indicates a potential upside of 71.7% from the current share price.
On the date of publication, Sohini Mondal did not hold (either directly or indirectly) positions in any securities mentioned in this article. All information in this article is for informational purposes only. For more details, please view the Barchart Disclosure Policy here.
The views expressed in this article are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
