By Bill Alpert

Warehouse operator Prologis led off the earnings season for real estate investment trusts last week, with a solid December quarter report. On the conference call, analysts mostly wanted to know about its side-venture in artificial intelligence data centers.

For a year, Prologis has been talking about data centers as an opportunity adjacent to the 6,000 logistics centers it has around the world. There's room for data centers that would consume 10 gigawatts of power, the company says. Power access is a limiting factor in such projects, and Prologis told analysts last Wednesday that it is already in various stages of arranging some five gigawatts worth.

"Our data center team and capabilities are expanding and executing at a very high level, and we're extremely excited by the significant value creation opportunity ahead," said financial chief Timothy Arndt on the call.

The data center "call option" moved Mizuho analyst Vikram Malhotra to boost his price target on the $127 stock, to $143 from $138. The logistics business remains the key to his Outperform rating on the stock, he wrote in a Sunday note, but data center deals could be worth $5 to $10 to the stock price over the next few years.

Prologis is a REIT standout, having grown its same-store net operating income per share by an average of 6.3% over the last 10 years, compared with 3% for the average REIT. Funds from operations -- the sector's cash flow measure -- grew 10%, compared with 3.5% at the average REIT.

The company's core business of logistics warehouses did well in the second half of 2025, allowing Prologis to report $5.86 a share in core funds from operations for the year (after promotional expenses). For 2026, it guided to a range of $6.05 to $6.25.

Prologis stock also did better than most REITs last year, as industrial and senior housing subsectors outperformed other REIT categories. After a 10% total return in the last 12 months, the stock now trades for about 20 times the average analyst forecast of $6.13 a share in funds from operation this year.

While most analysts surveyed by FactSet still rate Prologis a Buy, it gets a Hold rating from REIT sector veteran Steve Sakwa at Evercore ISI. He was joined in that view 10 days ago, as Morgan Stanley analyst Ronald Kamdem downgraded Prologis to a Hold from a Buy, based mainly on how industrials have outperformed other REITs.

Kamdem said the stock is already popular among institutions, and he thinks the data center opportunity has been priced in. That said, he acknowledges the strength in Prologis' basic warehouse business, and lifted his price target for the stock a bit, to $135 a share.

At Kamdem's target, Prologis would trade for 21 times his funds from operations estimate for 2027 -- which is a 22% premium to the average REIT.

"Now is the right time to take profits on industrials," Kamdem wrote, "as we only see 6% total return potential."

Write to Bill Alpert at william.alpert@barrons.com

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January 26, 2026 15:25 ET (20:25 GMT)

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