Lineage (LINE) faces downside risk to a H2 demand recovery and full-year guidance due to ongoing weakness in inventory trends and uncertainty related to tariffs, Morgan Stanley said in a research note Monday.

The brokerage said decelerating occupancy and pricing trends, along with soft same-store net operating income, suggest tenants are still maintaining lean inventories amid high inflation and broader macro uncertainty.

About 15% of Lineage's throughput volumes are tied to import/export activity, and evolving US tariff policy has added further pressure to leasing decisions, the analysts said.

Morgan Stanley also flagged added uncertainty from the company's chief financial officer transition and modeled continued weakness in Q2. The brokerage projects an 8.7% year-over-year drop in same-store NOI in Q2, a 2.6 percentage-point decline in occupancy to 82%, and a 4.7% drop in revenue with 38.5% margins.

For 2025, it sees 3.1% same-store NOI growth, with occupancy at 83% on a 2.4% revenue increase and 39.5% margins.

The firm said inventory levels have not meaningfully recovered from cycle lows, undermining the prior thesis of a demand rebound in 2025. Operating leverage has also been weaker than expected as revenue has declined faster than costs could be adjusted, leading to margin pressure.

Morgan Stanley lowered its adjusted funds from operations estimates for 2025 and 2026 by 1.6% and 3.7%, respectively, citing higher interest costs and lower expected NOI.

The brokerage downgraded the stock to equal weight from overweight and cut its price target to $50 from $75.

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