Pasadena, California-based Alexandria Real Estate Equities, Inc. (ARE) is a best-in-class, mission-driven life science REIT making a positive and lasting impact on the world. Valued at $16.7 billion by market cap, the company acquires, manages, expands, and develops office and laboratory space properties. It leases its properties to pharmaceutical, biotechnology, diagnostic and personal care products companies, research institutions, and related government agencies.
Companies worth $10 billion or more are generally described as “large-cap stocks,” and ARE perfectly fits that description, with its market cap exceeding this mark, underscoring its size, influence, and dominance within the REIT - office industry. ARE has pioneered life science real estate, establishing itself as a market leader, by focusing on innovation-driven sectors like life science, agtech, and technology. Strategic investments in Class A properties and collaborative environments create a dynamic ecosystem, boosting competitiveness. With a presence in key markets like Greater Boston, San Francisco Bay Area, and New York City, ARE benefits from geographical diversity, mitigating risks and unlocking revenue opportunities.
Despite its notable strength, ARE slipped 25% from its 52-week high of $130.14, achieved on Jul. 18, 2024. Over the past three months, ARE stock declined 1.9%, underperforming the Dow Jones Industrials Average’s ($DOWI) 1.7% losses during the same time frame.
In the longer term, shares of ARE remained unchanged on a YTD basis but fell 22.3% over the past 52 weeks, underperforming DOWI’s YTD marginal gains and 7.9% returns over the last year.
To confirm the bearish trend, ARE has been trading below its 50-day and 200-day moving averages since early August, 2024, experiencing some fluctuations.
Alexandria Real Estate's underperformance can be attributed to interest rate headwinds in the REIT sector and a downturn in the life science market. The demand for office properties for life science tenants has cooled off, leading to elevated vacancies and weak leasing activity. Additionally, factors such as California wildfires and oversupply in South San Francisco have contributed to a shortfall in performance.
On Jan. 27, ARE reported its Q4 results, and its shares closed down more than 4% in the following trading session. Its FFO of $2.39 matched Wall Street forecasts. The company’s revenue was $788.9 million, missing Wall Street forecasts of $789.1 million. ARE expects full-year FFO in the range of $9.23 to $9.43.
ARE’s rival, Kilroy Realty Corporation (KRC) shares lagged behind the stock, with a 13.5% dip on a YTD basis but outpaced the stock with a 2.1% loss over the past 52 weeks.
Wall Street analysts are moderately bullish on ARE’s prospects. The stock has a consensus “Moderate Buy” rating from the 13 analysts covering it, and the mean price target of $116.54 suggests a potential upside of 19.5% from current price levels.
