Alexander's (ALX) Stock Surge Raises Valuation Questions: Is the NYC REIT Overheated?

NEW YORK – Alexander's, Inc. (NYSE: ALX), the real estate investment trust with a storied portfolio of premier Manhattan properties, finds itself in the spotlight. Its stock, closing recently at $246.26, has posted a robust 12.5% gain year-to-date and a staggering 41.2% total return over the past year. This rally, however, is colliding with fundamental metrics that suggest a potentially rich valuation, setting the stage for a classic Wall Street debate: momentum versus value.

The numbers tell a conflicting story. On one hand, investor sentiment appears bullish, driving the share price well above a consensus analyst target of $190. On the other, the company's price-to-earnings (P/E) ratio sits at 34.1x, notably higher than the broader U.S. Retail REITs industry average of 27.8x and an estimated fair P/E of 28.1x. This premium valuation persists despite a 7.2% average annual decline in earnings over the past five years, including a 22.7% drop last year, alongside modest 1.2% revenue growth.

"The market is clearly pricing in a significant recovery or a premium for those iconic NYC addresses," said Michael Thorne, a portfolio manager at Hudson River Capital. "But at 34 times earnings with declining profits, you're paying for a story, not the current income stream. It feels like we're back in a 'growth-at-any-price' mindset for certain asset classes."

A discounted cash flow (DCF) analysis further complicates the picture, pointing to a fair value estimate of approximately $173 per share—a stark 30% below the current trading level. This gap highlights the tension between near-term trading momentum and long-term intrinsic value calculations.

"It's pure FOMO driving this," argued Sarah Chen, an independent trader known for her blunt market commentary. "People see the chart going up and the 'New York' name and they pile in, ignoring the deteriorating fundamentals. This is a value trap dressed up as a recovery play. The DCF doesn't lie."

Conversely, veteran real estate analyst David Reeves offered a more measured perspective. "You can't evaluate a REIT like Alexander's on P/E alone," he noted. "Its value is locked in its irreplaceable real estate, like the Bloomberg LP headquarters building. The low revenue growth masks the underlying strength and redevelopment potential of its assets. The premium might be justified if you believe in the long-term resilience of top-tier NYC office and retail."

For retail investors, the surge presents a dilemma. The strong returns are enticing, but the valuation metrics flash caution. The key question is whether the market is anticipating a sharp turnaround in earnings and asset values that the recent financials have yet to reflect, or if the stock has simply run ahead of itself.

Investor Takeaway: Alexander's presents a compelling case study in market sentiment clashing with traditional valuation tools. While the one-year performance is undeniably strong, the elevated P/E ratio and bearish DCF model suggest significant future growth is already priced in. Investors bullish on a swift recovery for Manhattan's prime real estate may see further upside, but value-oriented investors might view this as a time for caution rather than chase.

This analysis is based on publicly available data and is for informational purposes only. It does not constitute financial advice. Investors should conduct their own research or consult a financial advisor.