BTIG Remains Positive on Prologis (PLD) Following Investor Day; Says Trump-Related Selling Overdone
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BTIG affirms its Buy rating and $57 price target on Prologis, Inc. (NYSE: PLD) following the company's investor day earlier this week.
Analyst Tom Catherwood noted the following key points on Friday:
- Industrial Sector's Historic Run Can Continue... Our Industrial REIT coverage has averaged 4.8% SSNOI growth over the past five years. Given robust growth of e-commerce demand, U.S. consumption, and renewed demand from home builders, Prologis projects 4%-5% annual SSNOI growth from 2017-2019.
- While New Supply Remains In Check. Development complexity (i.e., lack of quality infill locations, longer entitlement processes, more environmental regulations) and more restrictive financing have kept smaller merchant builders out of the market. LTV on spec development is now 60%-65% (vs. 85%-90% during the last cycle) as Basel III increased capital retention ratios for construction loans; Basel IV's proposed ratios are even more restrictive (10% vs. 8% currently).
- Stock Has Oversold Potential Risk from Trump's Presidency. Prologis generates 28.8% of its NOI outside the U.S., including 4.0% in Mexico (33% manufacturing). Given this limited exposure, we believe Prologis' shares (down 7.9% since the election) have been oversold.
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