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Should You Hold On to Public Storage (PSA) Stock Right Now?

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·4 min read
In this article:
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  • PSA-PM
  • ILPT
  • BHR-PD

Shares of Public Storage PSA have outperformed the industry it belongs to in the past three months. The company’s shares have rallied 25.9%, while the industry has gained 14.6% over this period.

Moreover, the trend in estimate revisions for 2021 funds from operations (FFO) per share indicates a favorable outlook for the company, with the estimate moving marginally north over the past week.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Markedly, this self-storage REIT is one of the largest owners and operators of storage facilities in the United States. The ‘Public Storage’ brand is the most recognized and established name in the self-storage industry, with presence across all major metropolitan markets of the United States.

Thus, the company is likely to gain from economies of scale, apart from benefiting from brand recognition. It is also leveraging on technology for revenue optimization and cost efficiencies, and has invested in technologies, in the past few years.

In addition, Public Storage has been capitalizing on growth opportunities. This April, the company announced closing the buyout of ezStorage for $1.8 billion. The transaction is immediately accretive to the company’s FFO. The acquisition brings in a portfolio of 48 properties, encompassing 4.2 million net rentable square feet, to Public Storage’s platform.

The self-storage REIT has, in fact, enhanced its portfolio by 22 million net rentable square feet, or 13%, through $4.3 billion of acquisitions, development, and redevelopment since the start of 2019. With a solid access to capital at low interest rates, the company is well poised to take advantage of a potential opportunity.

Nonetheless, supply has been increasing in a number of markets in recent years. Besides, amid highly fragmented market in the United States, there is intense competition from numerous private, regional and local operators. This is likely to fuel competition for the company, affecting occupancies, curbing its power to raise rents and turn on more discounting.

Apart from this, vacates are still down for Public Storage and are helping the occupancy level to be high. However, such factors are likely to moderate as tenants revert to more normal move-out behavior as the impact of the pandemic fizzles out, leading to upward pressure on vacate trends, and resulting in strain on rate growth in many markets. These, particularly, impact the company’s ability to raise move-in rents as well as the existing tenant price increases over time.

Public Storage currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Industrial Logistics Properties Trust’s ILPT Zacks Consensus Estimate for 2021 FFO per share moved up 5% to $1.88 in the past two months. The company currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

National Storage Affiliates Trust’s NSA consensus estimate for current-year FFO per share has moved 2.6% north to $1.99 in a week’s time. Currently, the company carries a Zacks Rank of 2.

Braemar Hotels & Resorts Inc. BHR holds a Zacks Rank of 2, at present. The consensus estimate for the ongoing year’s FFO per share has been revised 4.5% upward to 46 cents over the past month.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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Public Storage (PSA) : Free Stock Analysis Report

National Storage Affiliates Trust (NSA) : Free Stock Analysis Report

Industrial Logistics Properties Trust (ILPT) : Free Stock Analysis Report

BRAEMAR HOTELS & RESORTS INC. (BHR) : Free Stock Analysis Report

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