BMO Capital Markets analyst Juan Sanabria downgraded National Storage Affiliates Trust ( NYSE: NSA ) to Market Perform as the self-storage industry's pricing power and occupancy are deteriorating faster than the analyst expected.
"With more limited growth, NSA stacks up as expensive when looking at a PEG (price/earnings to growth) ratio versus peers," the analyst wrote in a note to clients.
Even with the downgrade, NSA stock is up 1.3% in Tuesday morning trading against a backdrop of rising equity markets .
As a result, Sanabria trimmed National Storage ( NSA ) earnings estimates to below the Street consensus. His FFO per unit estimate for Q4 2022 goes to $0.70 from $0.72 (consensus $0.71) and for 2023 to $2.88 from $2.92 (consensus $2.99).
While occupancy remains above pre-COVID levels, the REIT saw average occupancy drop 240 basis points Y/Y in Q3, "which may see NSA pull back on existing customer rate increases," he said.
In addition, National Storage's ( NSA ) leverage is higher than its peers, with net debt+preferred/EBITDA at 6.0x vs. peers at 4.6x, the note pointed out.
Sanabria's Market Perform rating tracks with the SA Quant rating of Hold and diverges from the average Wall Street rating of Buy.
See why SA contributor Justin Purohit calls National Storage ( NSA ) a self-storage bargain
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National Storage Affiliates cut at BMO as self-storage REITs' pricing power slips