Extra Space Storage Shares Are Down As Weak Demand, Low Housing Churn Clouds Future

Extra Space Storage Inc. EXR shares are trading lower today. Bank of America Securities analyst Joshua Dennerlei downgraded the stock to Underperform from Neutral and lowered the price target to $155 from $172.

Last week, the company reported sales of $697.1 million, missing the street view of $728.8 million.

Second-quarter funds from operations (FFO) came in at $2.06, surpassing the estimate of $2.00.

The company expects core FFO of $7.95-$8.15 for fiscal 2024.

The analyst expects declining storage demand prospects through 2025, weaker demand in markets like Florida, worsened by EXR's increased exposure from the LSI merger, and limited pricing power with new customers.

Notably, move-in rents dropped 8% year-over-year in Q2, with July rates falling 12% as new customers stayed price-sensitive, writes the analyst.

Dennerlei adds that despite earlier hopes for summer improvements, peak leasing has passed, and visibility into 2025 remains unclear, potentially due to low housing churn.

The analyst revised the core FFO estimates to $8.07 for 2025 (from $8.57) and $8.26 for 2026 (previously $8.94). These are 4.1% below the Street's 2025 estimate and 5.8% below the 2026 estimate.

Also, the analyst forecasts 2025 SS NOI growth of -1.1% vs. the Street's consensus of 1.6%.

Investors can gain exposure to the stock via iShares Residential and Multisector Real Estate ETF REZ and Principal Exchange-Traded Funds Principal Real Estate Active Opportunities ETF BYRE.

Price Action: EXR shares are down 3.41% at $159.33 at the last check Monday.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.