Evercore ISI analyst Steve Sakwa downgraded Life Storage ( NYSE: LSI ) to In Line from Outperform on after he increased his expectation for LSI capital expenditures by $2M in 2022 and by $5M in 2023.
That resulted in a price target reduction of $1. "Given the stock's strong outperformance over the past 30 days (+12.0% vs. 0.4% for the RMZ), we are downgrading the stock" as the "projected total return is only 6%, which is below our sector average," Sakwa wrote in a note to clients.
Based on Friday's close, Life Storage ( LSI ) traded at an AFFO multiple of 20.6x, slightly above the REIT sector average of 19.x, he added. In Monday premarket trading, LSI shares have slipped 0.8% .
The downgrade was part of a much broader note on REITs that discussed the outlook for the sector in a post Fed tightening cycle by looking at the past four cycles dating back to 1994. The past four cycles showed strong returns for the group in the 30, 90, and 180 days following the last Fed rate hike.
"While history may not repeat itself following this tightening cycle, it bodes well for the group unless we see a major downturn in employment, or consumer spending as we head into 2023," Sakwa wrote.
The analyst's In Line rating on Life Storage ( LSI ) contrasts with the Quant rating of Strong Buy and the average Wall Street rating of Buy.
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Life Storage downgraded to In Line at Evercore ISI on valuation