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Why Prologis May Be the Smartest Backdoor Bet on AI Real Estate

June 5, 2019, Brazil. In this photo illustration the Prologis logo is displayed on a smartphone - Stock Editorial Photography

Key Points

  • Prologis is emerging as a stealth AI infrastructure play, offering powered shell real estate to hyperscalers.
  • Strong financials (52% EPS growth, FFO beat) and low debt levels position it for further expansion.
  • Stock is consolidating technically, with potential for a breakout above $110 if sentiment shifts.
  • Five stocks we like better than Prologis.

Prologis Today

Prologis, Inc. stock logo
PLDPLD 90-day performance
Prologis
$106.51 -3.66 (-3.32%)
As of 03:59 PM Eastern
This is a fair market value price provided by Polygon.io. Learn more.
52-Week Range
$85.35
$132.57
Dividend Yield
3.79%
P/E Ratio
28.86
Price Target
$120.47

Prologis Inc. NYSE: PLD has taken investors on an unwelcome round trip since it reported earnings on July 16. PLD stock initially jumped 4% after the real estate investment trust (REIT) reported. However, in less than 24 hours, the stock has given up those gains and more. As of midday trading on July 17, PLD stock is down 1.3% from its closing price on July 15.

This could be an example of investors shifting back to technology stocks as the AI trade recovers. However, that rotation into the AI trade is exactly why investors may want to look closely at Prologis.

The industrial REIT is leaning into the data center arena. Its broad portfolio exposes investors to this long-term trend without paying the premium for dedicated data center REITs like the category leader Equinix Inc. NASDAQ: EQIX, which trades at 80x earnings.

The Landlord for Data Center Landlords

Prologis's value comes from its positioning within the data center category. Many hyperscalers, such as Amazon.com Inc. NASDAQ: AMZN and Meta Platforms Inc. NASDAQ: META, want to build custom data centers. However, they need zoned and permitted land near scarce power infrastructure.

This type of land is becoming increasingly rare and is worth a premium price to the right company. That’s precisely where Prologis steps in. The company offers nearly 1.2 billion square feet of industrial space, often near major metropolitan areas with constrained power grids.

These “powered shells” provide real estate and grid access without the need to manage the server-side operations.

Offering the shells without being a full-service operator is an area where Prologis is beginning to capture market share. The benefit for Prologis and investors is that the company doesn’t have to absorb the full capital expense or complex operational details that come with data centers.

A Strong Financial Footing

Prologis’ earnings report was solid but not spectacular. The company's topline revenue of $2.03 billion was in line with expectations and a shade above the $2.01 billion it reported in the prior year.

The bottom line was stronger with the company delivering earnings per share (EPS) of $1.46, which was 5 cents above the $1.41 forecast. It was also 52% higher year-over-year (YOY).

The strong earnings point to the company’s growing funds from operations (FFO) that came in at $1.32, beating forecasts and higher YOY. Importantly, Prologis reaffirmed its full-year FFO guidance for $5.27 to $5.31 FFO per share on expectations of demand resilience, signaling continued confidence in industrial and digital demand trends.

The company’s net debt to adjusted EBITDA of 4.1x puts it in a stronger position than many REIT peers to invest in strategic growth, such as AI infrastructure and data center-adjacent real estate, without overleveraging or sacrificing its dividend.

What’s Next for PLD Stock?

Prologis Stock Forecast Today

12-Month Stock Price Forecast:
$120.47
13.11% Upside
Moderate Buy
Based on 20 Analyst Ratings
Current Price$106.51
High Forecast$137.00
Average Forecast$120.47
Low Forecast$95.00
Prologis Stock Forecast Details

On July 13, Wells Fargo & Co. NYSE: WFC gave PLD stock an Overweight rating with a price target of $137. That’s above the stock’s consensus price target of $120.47, a 12.2% gain. When combined with a dividend that currently yields 3.76% investors can get a total return that’s higher than the stock’s 5-year average. Plus, at 27x earnings, the stock trades at a discount to its historical averages.

However, what analysts say after earnings could impact the short-term direction of the stock. After hitting a 52-week low in April, PLD stock has entered a healthy consolidation pattern, trading between $105 and $110 since early June.

The MACD remains in bullish territory, and price action is coiling above its 50-period SMA, suggesting accumulation, not distribution. Should the stock break above the $110 resistance, it could confirm a trend reversal.

PLD stock chart

Should You Invest $1,000 in Prologis Right Now?

Before you consider Prologis, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Prologis wasn't on the list.

While Prologis currently has a Moderate Buy rating among analysts, top-rated analysts believe these five stocks are better buys.

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Chris Markoch
About The Editor

Chris Markoch

Editor & Contributing Author

Value Investing, Retirement, Dividend Stocks, Individual Investing

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Companies Mentioned in This Article

CompanyMarketRankâ„¢Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Prologis (PLD)
4.7104 of 5 stars
$106.51-3.3%3.79%18.96Moderate Buy$120.47
Equinix (EQIX)
4.8137 of 5 stars
$775.571.3%2.42%21.35Buy$957.05
Amazon.com (AMZN)
4.7763 of 5 stars
$223.880.3%N/A36.53Buy$250.35
Meta Platforms (META)
3.6613 of 5 stars
$701.41-0.2%0.30%27.42Moderate Buy$736.05
Wells Fargo & Company (WFC)
4.8196 of 5 stars
$79.69-0.3%2.01%13.90Moderate Buy$80.39
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