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BofA Downgrades Life Storage On Sales Pressure, Low Visibility, Valuation

Priya Nigam

Supply pressures remain a key concern for Life Storage Inc (NYSE: LSI), and leading indicators point toward a deceleration in rents in the near term, according to Bank of America Merrill Lynch. 

The Analyst

Analyst Jeffrey Spector downgraded Life Storage from Neutral to Underperform and lowered the price target from $105 to $99.

The Thesis

Revenues in high supply markets are expected to decline further due to three-year development lease-ups, Spector said in the Friday downgrade note. 

Developers continue to target high returns and margins given their abundance of equity and debt capital, the analyst said. Due to this, supply continues to spread from primary to secondary markets, he said. 

Life Storage has higher exposure to the secondary markets than its peers, Spector said, adding that this exposure poses a risk to the company’s earnings visibility in 2019 and 2020.

While Life Storage expects supply to peak this year, the analyst said it could witness peak supply pressure in 2020, after which it could experience a reacceleration in revenues in 2021.

Price Action

Life Storage shares were down 0.57 percent at $95.01 at the time of publication Friday. 

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Latest Ratings for LSI

Date Firm Action From To
Mar 2019 Bank of America Downgrades Neutral Underperform
Oct 2018 Citigroup Maintains Neutral Neutral
Jul 2018 Bank of America Maintains Neutral Neutral

View More Analyst Ratings for LSI
View the Latest Analyst Ratings

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