Americold Gets Cheap Enough to be Interesting

Americold’s (COLD) stock price is down 65% in the last 5 years.  This sort of move is unusual for a business that is so necessary and stable in the long-term sense of the word.  In any short window of time, cold storage volumes have vicissitudes, but over any long stretch of time, the trend is consistently up.  The world has used significantly more cold storage each decade than the previous decade, and there is a strong consensus that we will use it even more going forward.

This leads us to a juxtaposition of information that seems incompatible:

• COLD is a global market share leader in cold storage (along with Lineage).
• Long-term business trends are positive, including analyst estimates of earnings (AFFO/share)
• COLD stock is down 65%.

How can these coexist?

Why COLD dropped so much

Our analysis attributes the enormous price drop to 3 factors:

• COLD was significantly overvalued 5 years ago
• Oversupply as supply chains adjusted for a high inventory environment that proved not to be permanent
• COLD market price overshot on the selloff as major institutions dumped shares into too few buyers

The market tends to extrapolate current trends when the economic reality leans much more toward a return to mean.

The longstanding tradition of companies that sell physical goods is to run as lean on inventory as possible, which is, of course, the most financially efficient way to operate.  A business can only run lean, however, when supply chains are smooth and reliable.

Well, during the pandemic shutdown, everything became an unknown, and supply chains were no longer smooth or reliable.  Businesses were faced with a choice to either risk frequently running out of products to sell or run at substantially higher inventory levels.

Running out of products to sell means no revenue so businesses overwhelmingly chose to beef up their inventory.

Larger inventory is unequivocally good for cold storage.  COLD is paid per pallet stored, as well as getting service revenues for throughput.

While the inventory glut brought about by the pandemic was a positive for COLD’s business, the market traded it wrong.

When a cyclical business is at the peak of its cycle, it should trade at low multiples because the cycle will inevitably return to mean.

The market likes to extrapolate rather than read cycles for what they are.  So it traded COLD at multiples over 30X at a time when its earnings were abnormally high due to the inventory glut.

This led to a double whammy for COLD’s stock price.  Earnings would eventually have to weaken as inventories returned to more normal levels, and the multiple would eventually have to come down from the 30X level, which implied rapid growth.

So down it went.

Just as the market made the mistake of extrapolating peak inventory as a permanent uptrend, it is now making the mistake of reading low inventory/throughput as a permanent downtrend.

So COLD is trading at very low multiples at the same time as earnings are in a trough.

That just is not a mathematically correct way to trade cyclical companies.  

Analysts understand the business cycle.  They see that earnings are dropping in 2025 and 2026, but are positioned to rebound in 2027 and reach new highs in 2028.

So unless the consortium of analysts that follow COLD are extremely wrong in their forecasts, the market is putting a trough multiple on a company at trough earnings.

Perhaps part of the overshoot in COLD’s selloff is related to large institutions dumping shares into a market that was already bearish on the stock.

Cohen and Steers dumped about 20 million shares.

Norges Bank sold about 10 million shares.

I posit that these large volume sales accelerated the downtrend in COLD’s stock price and caused it to drop further than it should have.

So that is how COLD got here.  Let us now look at COLD’s fundamentals and its valuation.

Fundamental troubles appear to be at industry level rather than company level

In my opinion, there is a big difference between a company struggling versus an industry downturn.

An industry downturn will be subject to a cyclical rebound, whereas an individual company struggling may permanently lose market share.

COLD cut its earnings guidance on August 7th, 2025, reducing the low end of its revenue forecast to -4%.

Notably, Lineage Logistics (LINE) also cut its earnings around the same time with a full 20 cent cut to AFFO.

LINE and COLD are the top 2 players in the industry by a significant margin so if they are both struggling it is very likely to be an industry level problem.  Also worth noting is the nature of lost revenues is in pallet volume rather than services as highlighted below.

Service revenue being up indicates that customer end usage of frozen items is still strong.  The negative adjustment to storage revenue just indicates that tenants are sitting on lighter inventory volumes.

This matters because there is a finite minimum level of inventory at which tenants can run.  If they are already running lean, they cannot drop inventory much further. 

I see this as additional evidence that the bottom is nearly in.  I think somewhere between now and the first half of 2026 will be the trough, followed by a rebound.

Storage margins dropped 180 basis points in 2Q25, but remain healthy at 63%.  Service margins are lower at 13.3%, but that segment grew margin by 90 basis points.

Americold’s future will hinge on 3 factors:

• Stabilized inventory
• Stabilized throughput level
• Stabilized margins

Inventory levels are hard to predict because it mostly depends on how secure tenants feel about the smoothness of their supply chains.  There is, however, a range in which inventory levels will likely stay.  The 2021 era represents the top of that range while we believe the present environment is quite close to the low end of that range.

So while we cannot predict where inventory levels will be at any given time in the future, we think they are firmly below the mean.

Throughput volume will scale with overall consumption.  Historically it has consistently increased.  We believe this will continue, albeit at a slower pace as population growth is slower than historical averages.

Margins are a bit of an unknown.  Higher electricity costs have hurt a bit, but COLD has managed to do some cost cutting and efficiency initiatives that have been fairly effective at keeping margins up even in the challenging environment.  I suspect current margins are approximately at stabilized levels and will flex up and down with cyclicality.

Overall, I think long term fundamentals are reasonably good.  The cold storage industry has secular growth, and COLD has a large market share within it.

Valuation

After the massive drop in share price, COLD looks extremely cheap at 55% of net asset value.

It is also trading at 9.5X forward consensus AFFO.

AFFO can be a wonky metric, however, as each company defines it differently.  In the case of COLD we think they have a couple of addbacks that don’t really reflect what we would consider true earnings.

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