E-commerce Trends And Higher Rates Will Erode Portfolio Value

Key Takeaways

• Shifts in e-commerce, technology, and market competition threaten property demand, occupancy, and stable revenue generation across Broadstone's portfolio.
  
• Higher interest rates and rising capital costs are set to squeeze earnings, reduce net asset value, and hinder future portfolio growth.
  
• Strong property management, prudent capital allocation, and favorable market trends underpin sustainable growth and dividend stability, supporting long-term shareholder value and portfolio resilience.

Catalysts

BNL is an industrial-focused, diversified net lease REIT that invests in primarily single-tenant commercial real estate properties that are net leased on a long-term basis to a diversified group of tenants.

• The persistent rise of e-commerce and remote work is set to suppress demand for traditional retail and some commercial real estate subtypes within Broadstone's portfolio, increasing future vacancy risk and ultimately leading to lower occupancy and reduced net operating income growth over the next several years.
  
• Prolonged higher interest rates are expected to significantly increase borrowing costs and exert downward pressure on property values, eroding Broadstone's net asset value and reducing acquisition yields, which will compress long-term returns and slow earnings growth.
  
• Broadstone's increasing portfolio concentration in industrial and healthcare sectors exposes it to sector-specific downturns and shifting tenant dynamics if demographic changes or technological disruptions reduce demand, thereby raising the volatility of future cash flow and threatening stable revenue generation.
  
• Intensifying competition from larger REITs and private capital for high-quality net lease assets is already squeezing cap rates and is likely to compress acquisition spreads further, curbing Broadstone's ability to drive accretive portfolio growth and putting future margins under pressure.
  
• Accelerating property obsolescence driven by rapid advancements in logistics and automation will force Broadstone into more frequent and expensive reinvestments or face heightened impairment risks, which will increase future capital expenditures and drag on long-term earnings and free cash flow.

Broadstone Net Lease Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Broadstone Net Lease compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Broadstone Net Lease's revenue will grow by 4.4% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 22.1% today to 25.6% in 3 years time.
• The bearish analysts expect earnings to reach $128.9 million (and earnings per share of $0.64) by about August 2028, up from $97.7 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 26.9x on those 2028 earnings, down from 32.5x today. This future PE is greater than the current PE for the US REITs industry at 26.8x.
• Analysts expect the number of shares outstanding to grow by 0.32% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.63%, as per the Simply Wall St company report.

Broadstone Net Lease Future Earnings Per Share Growth

Risks

• Broadstone Net Lease has demonstrated consistent, mid-single-digit AFFO per share growth, with 4.2% guidance growth for 2025 and visibility into continued growth for 2026 and 2027, which should support both earnings and long-term dividend stability.
  
• The company's robust and expanding build-to-suit pipeline, currently comprising over $370 million in projects with committed new annual base rent, provides highly visible multi-year embedded revenue growth that could drive higher net operating income and future portfolio value.
  
• High portfolio occupancy rates at 99.1% and strong cash rent collection of 99.6%, coupled with efficient resolution of tenant credit events and reduced bad debt reserves, indicate best-in-class property management that helps protect margins and cash flow stability.
  
• Broadstone's proactive capital management, including a demonstrated ability to fund growth through retained cash flow, asset recycling, and disposition proceeds rather than dilutive equity raises, helps support growth in AFFO per share and protects shareholder value even in challenging equity market conditions.
  
• Secular trends such as increased demand for industrial distribution, logistics, and specialized assets-amplified by supply chain localization efforts, e-commerce growth, and institutional investor appetite for real asset exposure-could buoy revenue and property values across Broadstone's portfolio, contributing to long-term share price appreciation.

Valuation

• The assumed bearish price target for Broadstone Net Lease is $14.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Broadstone Net Lease's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $22.0, and the most bearish reporting a price target of just $14.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $502.8 million, earnings will come to $128.9 million, and it would be trading on a PE ratio of 26.9x, assuming you use a discount rate of 7.6%.
  
• Given the current share price of $16.81, the bearish analyst price target of $14.0 is 20.1% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.