BofA Resumes Prologis at Buy on Persistent Pricing Power and 2023 Growth

© Reuters.

By Sam Boughedda

BofA resumed coverage of Prologis (NYSE:PLD) with a Buy rating and a $140 price target in a note Monday, following last week's earnings release, which demonstrated the company's premier global warehouse platform, persistent pricing power, and attractive 2023 growth outlook.

Analysts there stated the company delivered a strong beat on core results, with leasing spreads accelerating to 38.5% in the third quarter.

"We are encouraged to see the +12.5 bps bump in SS NOI guidance to 8.63% at the midpoint and continued pricing power after Avison Young discussed +3.9% Q/Q US market rent growth on our Q3 market update call," explained the analyst. "Our rating is based on persistent pricing power driving double-digit core 2023 FFO growth and we see PLD as well-capitalized with $5.3B cash to deploy opportunistically."

The analysts wrote that the company expects occupancy to remain stable and lease mark-to-market to further widen to 65% by year-end from 62% in the third quarter and 56% in the second quarter.

"PLD raised its 2022 rent growth forecast +300 bps to 26% globally and 28% in the US after strong 3Q performance. PLD expects mid-to-high single-digit rent growth in 2023. PLD highlighted 84% rent change on 3Q signings (93% in the US), which should commence in early 2023. This compares to 62% on 3Q commencements, which would have largely signed in early 2022. PLD sees annual escalators around 4% in new leases," continued the analysts. "Leasing activity remains above long-term averages despite some softening from pandemic highs but remain in line with 2019 levels."