California-based Public Storage (PSA) is a REIT that primarily acquires, develops, owns, and operates self-storage facilities and offers storage spaces for lease on a month-to-month basis for personal and business use. Valued at a market cap of $53.3 billion, the company also provides other related operations, including tenant reinsurance and third-party self-storage management.
Shares of this self-storage REIT have underperformed the broader market over the past 52 weeks. Public Storage has gained 6.5% over this time frame, while the broader S&P 500 Index ($SPX) has soared 17.6%. Moreover, on a YTD basis, the stock is up 1.3%, compared to SPX’s 1.7% rise.
Narrowing the focus, PSA’s underperformance looks even more pronounced when compared to the Real Estate Select Sector SPDR Fund’s (XLRE) 9.6% return over the past 52 weeks and 4.3% gain on a YTD basis.
On Feb. 24, PSA released its Q4 earnings results and delivered a mixed performance. The company reported a core FFO of $4.21 per share, which increased marginally from the year-ago quarter but fell short of the Wall Street estimates of $4.23. The FFO shortfall can be primarily attributed to a decline in revenue and operating income from Same Store Facilities, driven by lower occupancy rates and higher operating costs. However, on a positive note, total revenues rose 1.7% year-over-year to $1.2 billion, aligning with analyst expectations.
For the current fiscal year, ending in December, analysts expect Public Storage’s FFO to grow 3.3% year over year to $17.22 per share. The company’s FFO surprise history is mixed. It exceeded the Wall Street estimates in one of the last four quarters while missing on three other occasions.
Among the 19 analysts covering the stock, the consensus rating is a “Moderate Buy,” which is based on 10 “Strong Buy” and nine “Hold” ratings.
On Jan. 2, Jefferies maintained a “Buy” rating on Public Storage but lowered its price target to $340, which indicates a 12.1% potential upside from the current levels.
The mean price target of $341.18 represents a 12.5% upside from PSA’s current price levels, while the Street-high price target of $378 suggests an upside potential of 24.6%.
