After A Massive Rally, The Easy Money May Be Gone – Prologis (NYSE:PLD)

Prologis, Inc. (PLD) currently sits in our neutral range for valuation. I think that’s fair. Here are a few factors to consider:

• Shares (at $132.05 intraday) trade at 27.63x forward AFFO consensus estimates of $4.80. This is on the high end for REITs presently.

• Shares are about 47.8% above their lowest close over the last 52 weeks.

• Shares are about 7% under their highest close over the last 52 weeks (set in early March 2026).

• Dividend yield is at 3% with about 4.9% guidance for growth in Core FFO per share excluding net promote income this year.

• We want to pay strong attention to the growth. However, we are focused on long-term growth rates while acknowledging that short-term growth rates can have a large impact on the multiple.

• Prologis has rallied all the way from our “Strong Buy” range to our “neutral” range. We currently have a neutral rating on PLD. (For reference, our last article was here).

Here’s a chart showing the historical price and multiples:

Using the share price or the forward AFFO multiple, we saw the valuation move up quite a bit.

Prologis has delivered a strong rally over the last year, with shares climbing substantially in roughly the last 11 months. That performance has pushed the valuation higher and took our valuation from strong buy to our neutral area. With the stock already reflecting some optimism, it becomes important to evaluate the latest operating results and the outlook for continued growth.

Prologis Core FFO And AFFO Results And Guidance

Prologis results:

• Core FFO of $1.44 matched estimates of $1.44. Excluding net promote income, $1.46 would beat estimates.

• AFFO per share of $1.20 beat estimates of $1.15 by $.05.

Here’s the big chart:

We also track the guidance for Core FFO Ex Net Promote Income because I find that value is more useful for reflecting the performance of the real estate portfolio:

Note: We could use the term “Net Promote Expense.” For simplicity, I list it as “income” even if we have a negative value. Over long periods the value will usually be positive.

Looking To 2026

• Consensus estimate was $6.13.

• Guidance for Core FFO was $6.10 (lower by $.03).

• Guidance for Core FFO Ex Net Promote Income was $6.15 (higher by $.02).

That’s implying growth continues at about 5%. Absent any negative shocks, we may see PLD beat the original guidance as they did last year. For 2025 they ended up about 1.5% above the original guidance.

Guidance for same-store net operating income is important also. It is one of the major factors we consider when evaluating long-term growth rates and the appeal of the underlying real estate.

That’s slightly faster growth in cash NOI than PLD saw in 2025.

General Notes

The major criteria continue to look good.

Average occupancy guidance has a midpoint of 95.25%, similar to the best quarter for PLD in 2025. This matches commentary from much earlier (several quarters ago) about when occupancy was expected to hit the low point and the rebound we would most likely see.

Rent change on renewals (leasing spread) is coming down but is still quite solid. If this trend continues, it could pressure same-store net operating income. But we’re still seeing healthy performance for PLD.

Interest Rates

Like many REITs with operations around the globe, PLD has utilized lower interest rates in Europe for a greater portion of their debt recently. This mitigates part of the pressure from higher rates. They also have a reasonably long weighted maturity on their debts at 8.5 years. However, long-duration (like 10-year Treasury) interest rates are currently trending higher in the United States. That is generally negative for valuation.

Over the last several days, we’ve also seen short-term rates jumping higher.

Data Centers

We may see PLD putting about 40% of their new development into data centers (based on the PLD Q4 2025 earnings call).

I’ve mentioned before that data centers can be built at fairly high yields, which is quite attractive. It creates a potential challenge down the road from excessive development, but it makes them attractive development projects today. This is still a minor portion of PLD’s portfolio, but they’ve evaluated the land in their portfolio and found many cases where they can optimize the value by building data centers (instead of industrial). This can also be used for attracting investor capital into the development funds Prologis manages. I like this method of exposure to data centers much more than I would like owning data center REITs. PLD is still an overwhelmingly industrial REIT with a great balance sheet and expertise in development.

My Expectations

I’m inclined to think PLD will slightly outperform guidance so long as the economy doesn’t go off the rails. That’s pretty good. They keep the balance sheet strong and deliver steady growth over time. The performance of the underlying portfolio backs the growth in AFFO per share. However, valuation has been pushing quite a bit higher. I’m not attracted to the current multiple.

With occupancy averaging about 95% over 2025, PLD has some room to grow there. Management is great at forecasting global development and demand levels. I expect them to be right. However, I find the projections they provide typically are usually designed to be slightly cautious, so they are less likely to have something “go wrong.” Management calls for global warehouse occupancy to increase slightly over the year, with rent growth emerging towards the end of the year.

Conclusion

AFFO per share solidly beat estimates, but AFFO can be a bit volatile because of the timing for maintenance capex. In this case, I think AFFO introduces more volatility for PLD than it does for some of the non-industrial REITs.

Guidance was roughly on par with estimates, depending on how we adjust for the negative $.05 related to net promote income. I see that as a non-issue. So I don’t think anything here should land as a positive or negative surprise.

Recent Trade

I believe it is important to disclose trading activity and to provide evidence for trades. If investors don’t track their positions, they can end up with some delusional ideas about their performance. We recently closed out the vast majority of our position in Prologis. The trade was provided to subscribers with a real-time trade alert:

To enhance transparency, I also believe it is important to include screenshots showing confirmation of a trade. Some people say there is no reason to do that. I do it for two reasons:

1. Many investors have told me that it is easier for them to be clear about my outlook when they can see the trade.

2. It establishes a definitive statement about the actual execution. Typos happen. Miscommunication happens. The screenshot prevents miscommunication. Either that trade happened exactly as shown, or the analyst faked the screenshot and should be held to account.

Therefore, here is the screenshot:

Here are the returns on the shares I sold: