Tuesday, KeyBanc Capital downgraded Extra Space Storage Inc. (EXR) and Public Storage (PSA) shares to Underweight from Hold. The brokerage established its price target of $6.50 on EXR and $56 on PSA.
Analyst Jordan Sadler noted that Extra Space Storage reported first quarter of 2009 results that were weaker than expected and pointed to a sharper deterioration across the Self Storage Sector, as full year guidance was meaningfully reduced.
In addition, the analyst said that Extra Space Storage had little good news to announce on the capital raising front to act as a counterbalance to the weaker than anticipated core. This fundamental weakness has come on top of a recent runup in EXR's share price of 43% since the end of March vs. a 37% appreciation in the MSCI US REIT index over the same period.
The analyst downgraded EXR stock to reflect the downside surprise and likelihood of further deterioration, as well as the less attractive valuation. The analyst also downgraded PSA stock for similar reasons, as the stock remains the most expensive in the Self Storage Sector and will likely see similar erosion in core operating performance when it reports later this week.
Currently, EXR is down $0.86 or 10.90% and trading at $7.03. PSA is currently trading at $64.04, down $4.71 or 6.85%.
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