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BofA Downgrades Life Storage On Sales Pressure, Low Visibility, Valuation

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BofA Downgrades Life Storage On Sales Pressure, Low Visibility, Valuation

Supply pressures remain a key concern for Life Storage Inc (NYSE: LSI), and leading indicators point toward a deceleration in rents in the near term, according to Bank of America Merrill Lynch. 

The Analyst

Analyst Jeffrey Spector downgraded Life Storage from Neutral to Underperform and lowered the price target from $105 to $99.

The Thesis

Revenues in high supply markets are expected to decline further due to three-year development lease-ups, Spector said in the Friday downgrade note. 

Developers continue to target high returns and margins given their abundance of equity and debt capital, the analyst said. Due to this, supply continues to spread from primary to secondary markets, he said. 

Life Storage has higher exposure to the secondary markets than its peers, Spector said, adding that this exposure poses a risk to the company’s earnings visibility in 2019 and 2020.

While Life Storage expects supply to peak this year, the analyst said it could witness peak supply pressure in 2020, after which it could experience a reacceleration in revenues in 2021.

Price Action

Life Storage shares were down 0.57 percent at $95.01 at the time of publication Friday. 

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Latest Ratings for LSI

DateFirmActionFromTo
Oct 2019UpgradesHoldBuy
Oct 2019MaintainsOverweight
Sep 2019MaintainsOutperform

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Posted-In: Bank of America Merrill Lynch Jeffrey SpectorAnalyst Color REIT Downgrades Price Target Analyst Ratings Real Estate Best of Benzinga

 

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