Citi lowers Alexandria Real Estate stock price target to $74

Citi analysts lowered their price target on Alexandria Real Estate (ARE) to $74 from $110, maintaining a Neutral rating, citing reduced 2025 and 2026 FFO estimates due to life science sector challenges and decreased capitalized interest; the stock is near its 52-week low despite a high dividend yield of 7.52%. The revision follows mixed Q1 2025 earnings where ARE missed EPS estimates but beat revenue expectations, leading to downward revisions in full-year Core FFO guidance due to slower leasing and higher interest expenses, with analysts also noting declining occupancy rates and a strategic shift towards mega-campus assets.

Analysis

Alexandria Real Estate (NYSE:ARE) faces a revised outlook from Citi, with the price target significantly reduced to $74 from $110, although a Neutral rating is maintained. This adjustment is primarily driven by lowered 2025 and 2026 Funds From Operations (FFO) estimates, now at $9.26 and $9.02 respectively, reflecting ongoing headwinds in life science fundamentals and a decrease in capitalized interest. The stock's recent performance underscores these challenges, having fallen 34% over the past six months to trade near its 52-week low of $67.37, despite an InvestingPro analysis suggesting it appears undervalued. Citi's new target is based on approximately 10.5 times the 2026 estimated Adjusted FFO and an updated Net Asset Value (NAV) estimate of $111.86, down from $132.26, incorporating a lower multiple and higher cap rate due to the persistent sector weakness. First-quarter 2025 results were mixed: ARE reported an EPS of -$0.07, missing the $0.76 consensus, but exceeded revenue expectations with $758.2 million. Consequently, management revised its full-year 2025 Core FFO guidance downward by $0.07 per share at the midpoint, citing slower leasing activity and increased interest expenses. JPMorgan also lowered its price target to $95.00 from $117.00, maintaining a Neutral rating, highlighting similar concerns. Operationally, occupancy rates declined to 91.7%, and the company is strategically focusing on its mega campus assets. Despite these pressures and an increased risk of further downward revisions to consensus earnings and guidance, ARE maintains a strong dividend yield of 7.52% and has a 14-year history of dividend increases.

Key Decisions for Investors

• Investors should carefully evaluate the attractive 7.52% dividend yield and consistent dividend growth against the significant stock price depreciation and downward FFO revisions driven by persistent life science sector challenges and increased interest expenses.
• Monitor upcoming earnings for improvements in leasing velocity, stabilization in occupancy rates (currently 91.7%), and any further revisions to 2025 guidance, as these will be key indicators of the impact of the mega-campus strategy and market conditions.
• Given the multiple analyst price target reductions and the noted risk of further downward revisions to consensus estimates, a cautious stance is advisable; consider current valuations in light of the fundamental headwinds before adjusting positions, despite some indicators suggesting potential undervaluation.