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Investing.com -- Merlin Properties SA (BME:MRL) shares fell on Monday after Jefferies downgraded the stock to Hold from Buy and cut its price target to €16 from €17, citing funding concerns and credit risk from neo-cloud tenants.
The downgrade follows the stock’s 20% year-to-date performance. Jefferies pointed to a funding overhang and credit risk exposure as key concerns for the real estate company.
Merlin’s leased IT capacity increased to 160MW after converting BIOARA 01 (48MW) into a signed pre-let 18 months before delivery. The company brought forward the delivery of LIS-VFX 04-05 data centers to the first half of 2029 from the first half of 2030-2031 to align with LIS-VFX 03, creating a 180MW Lisbon campus.
Data center values rose 28% like-for-like in the first half of 2026 to €988 million, with a further €321 million expected to be recognized over time. This includes €101 million of promote accrued to date that Merlin will pay to Edged, with €20 million paid in March.
Jefferies highlighted that the tenant mix on the 180MW pre-let comprises approximately 85% neo-cloud operators. CoreWeave’s credit, which the firm believes accounts for half of the rents for operated data centers, is rated B+ by S&P, and its credit default swap has risen to 675 basis points, implying a 42% default probability.
Merlin raised its fiscal 2026 funds from operations per share guidance by 3.8% to €0.55, or €340 million. Management intends to issue a convertible bond in the second half to fund Phase III, structured short-dated with a premium closer to expected three-year net asset value to ensure conversion while maintaining loan-to-value below 35%.
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