On Monday, Mizuho initiated coverage on Lineage Inc (NASDAQ:LINE), a leading cold storage real estate investment trust (REIT), assigning the stock a Neutral rating and setting a price target of $86.00. Lineage, recognized as the world’s largest cold storage landlord boasting 3 billion cubic feet, stands out due to its significant scale, consistent record of external growth, and advanced technology utilization.
The company’s market position is notable in an industry that is predominantly non-institutionalized and operationally demanding, with limited capacity to adjust pricing. Mizuho highlighted three main areas of investor focus regarding Lineage: the strategies to enhance core operating metrics, the timing and magnitude of its external growth, and the advantages conferred by its technological capabilities.
Since its initial public offering, Lineage has exceeded the performance of other REITs by more than 400 basis points. The stock is currently trading at 25 times its projected 2025 adjusted funds from operations (AFFO) and 24 times its enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA). These multiples are compared to its primary competitor, which trades at 18 times AFFO and 17 times EV/EBITDA.
The Neutral rating reflects Mizuho’s view that the positive aspects of Lineage’s business are already factored into the company’s current market valuation. The price target of $86 suggests that Mizuho sees limited upside potential from the stock’s current trading levels, based on their analysis.
Lineage Inc has made significant strides in its financial operations. The company utilized proceeds from its initial public offering (IPO) to fully repay its senior unsecured term loan facility, which had an outstanding balance of approximately $2.4 billion.
Simultaneously, the company has been the subject of favorable coverage by several leading analyst firms. Baird initiated coverage on Lineage with an Outperform rating and a 12-month price target of $91, citing the company’s substantial investment in its operating platform and the potential for operational efficiencies. The firm also forecast a long-term consistent earnings growth ranging from 8-12% for Lineage.
JPMorgan initiated coverage on Lineage, setting a price target of $93 and giving the stock an Overweight rating. The firm anticipates earnings growth for Lineage in 2025 and 2026, driven by an increase in Net Operating Income (NOI) and cost-saving initiatives. Goldman Sachs also initiated coverage, issuing a Buy rating and a 12-month price target of $105, with similar expectations for earnings growth.
InvestingPro Insights
As Lineage Inc (NASDAQ:LINE) navigates the competitive landscape of industrial REITs, recent data from InvestingPro provides a nuanced perspective on the company’s financial health and market position. With a market capitalization of $21.17 billion, Lineage stands as a prominent player in its industry. However, InvestingPro Tips indicate that the stock may be in overbought territory, as suggested by the Relative Strength Index (RSI), and it is trading at a high Price / Book multiple of 4.25. These metrics suggest that investors should tread carefully, considering both the company’s significant scale and the current valuation multiples.
Furthermore, Lineage’s financial performance over the last twelve months reflects a non-profitable status, which is a critical consideration for investors. The company’s revenue growth has shown a slight decline of 0.55%, and it is trading near its 52-week high, at 93.47% of that peak. Despite these challenges, Lineage does not pay a dividend, which may influence investment decisions for those seeking income-generating assets. For a more comprehensive analysis, there are additional InvestingPro Tips available that delve deeper into Lineage’s financials and market performance, assisting investors in making informed decisions.
It’s worth noting that the InvestingPro Fair Value estimate for Lineage stands at $57.14, which contrasts with the current trading price and Mizuho’s price target, suggesting that potential investors should consider a broad range of insights when evaluating the stock’s true value. As the market continues to assess Lineage’s prospects, these insights from InvestingPro could be pivotal in shaping investment strategies.
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