2023-07-20 10:31:12 ET
Jefferies started coverage of Alexandria Real Estate Equities ( NYSE: ARE ) with a Buy rating, contending that an expected slowdown in the life science industry's fundamentals won't be as bad as the market fears.
Alexandria Real Estate's ( ARE ) stock has dropped 23% i n the past six months, compared with the S&P 500's 17% increase. With ARE being the only pure-play lab/life science REIT, concerns about slower funding for life sciences, which was made worse by Silicon Valley Bank's demise, have pressured the shares. Fears of oversupply and uncertainty over tenant utilization also factored into the stock's weakness, said Jefferies analyst Peter Abramowitz.
"The question at this point is not whether fundamentals will slow, but rather whether it will be a normal cyclical moderation or outright deterioration. We are firmly in the former camp," the analyst wrote in a note to clients. "Notably, biotech funding appears to be recovering, and life science VCs are sitting on substantial dry powder from the second-highest fundraising year on record in '22."
Fund typically take about five years to deploy, Abramowitz added.
Even with fundamentals softening, he expects Alexandria Real Estate's ( ARE ) FFO per share to grow 6.2% in 2023 and 7.3% in 2024. As such, he thinks ARE shares are underappreciated at its current valuation.
ARE shares edged up 0.1% in Thursday morning trading.
Abramowitz's Buy rating contrasts with the SA Quant rating of Hold and more closely aligns with th e average Wall Street analyst rating of Strong Buy and the average SA Analyst rating of Buy.
More on Alexandria Real Estate:
- Alexandria Real Estate Equities: The Market May Be Wrong About This 4.3% Yielding REIT
- Alexandria's valuation grade and underlying metrics
- Alexandria Real Estate announces $1B additional commitments for credit line
- Alexandria Real Estate: Rejecting the Office REIT Comparison
For further details see:
Alexandria Real Estate gets new Buy rating at Jefferies