Valued at a market cap of $18.9 billion, Alexandria Real Estate Equities, Inc. (ARE) is a leading urban office REIT focused on developing and operating life science, agtech, and technology campuses in premier innovation clusters across North America. With a mission-driven approach and a proven track record, it delivers dynamic environments that foster innovation, attract top talent, and drive long-term value for its diverse tenant base.
Shares of the Pasadena, California-based company have underperformed the broader market over the past 52 weeks. ARE has risen 3.6% over this time frame, while the broader S&P 500 Index ($SPX) has rallied 31%. In 2024, shares of ARE are down 14.6%, compared to SPX’s 25.2% gain on a YTD basis.
Focusing more closely, the life science real estate company has also lagged behind the Real Estate Select Sector SPDR Fund’s (XLRE) 21.9% return over the past 52 weeks and a 10.1% YTD return.
Despite reporting better-than-expected Q3 revenue of $791.6 million on Oct. 21, shares of ARE fell 1.3% the next day due to a slight miss on AFFO, which came in at $2.37 per share, just below analyst estimates. Investors were also concerned about the expected occupancy pressure from move-outs in Q4 and Q1, which could affect rental income through at least mid-2025. Additionally, the $1.2 billion in asset dispositions under the company’s asset recycling program raised fears of near-term earnings dilution.
For the current fiscal year, ending in December, ARE is expected to report an FFO per share of $9.47, reflecting a 5.6% year-over-year growth. The company’s earnings surprise history is mixed. It beat the consensus estimates in two of the last four quarters while missing on two other occasions.
Among the 14 analysts covering the stock, the consensus rating is a “Moderate Buy.” That’s based on four “Strong Buy” ratings and 10 “Holds.”
This configuration is less bullish than three months ago, with seven “Strong Buy” ratings on the stock.
On Nov. 15, Deutsche Bank analyst Omotayo Okusanya downgraded Alexandria Real Estate to “Hold”, lowering the price target to $112 due to concerns about the company’s earnings growth outlook through 2025. The downgrade reflects anticipated occupancy pressure from expected move-outs and $1.2 billion in asset dispositions, which could be dilutive to earnings in the near term.
The mean price target of $129.62 represents a premium of 19.7% to ARE’s current levels. The Street-high price target of $186, implies a potential upside of 71.7% from the current price.
