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Here's Why You Should Hold On to Extra Space (EXR) Stock Now

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Extra Space Storage Inc. (EXR - Free Report) boasts a solid recognition in the self-storage industry as well as emerged as the second-largest self-storage operator and the largest self-storage management company in the United States. It enjoys strong presence in key cities and opts for strategic joint ventures to boost long-term profitability.

The company significantly expanded its business in recent years, growing its branded-store count from 820 in 2010 to 1,878 in the second quarter of 2020. Also, total stores managed for third-party owners increased from 160 to 700 over the same period.

In the past 10 years, Extra Space Storage has spent $6.8 billion in acquisitions. The majority of its stores are gathered around large population centers. Apart from having above-average population, these markets enjoy favorable income demographics for stores. Therefore, with a geographically diversified portfolio and significant scale, the company is poised for long-term growth.

Further, the company is focused on improving its balance sheet. The company exited second-quarter 2020 with $56.4 million of cash and cash equivalents and had $883 million in revolving line of credit availability. The company had $298.6 million available for issuance under its ATM program as of Jun 30, 2020. With solid balance-sheet strength, the company is well poised to capitalize on external growth opportunities that will likely increase going forward.

Further, the trends in estimate revisions indicate a favorable outlook as the Zacks Consensus Estimate for funds from operations (FFO) per share moved marginally upward to $4.86 and $4.87 for 2020 and 2021, respectively, in the past month.

However, the adverse impact of the coronavirus pandemic is a concern. There is a substantial reduction in demand for self-storage space, which is affecting move-in volumes despite lower move-in rental rates. Furthermore, stress on customers’ financial capacity will likely result in rent-collection issues. As such, same-store rental revenues and net operating income are likely to be affected in the near term.

Moreover, there is a development boom of self-storage units in many markets. This high supply is likely to fuel competition, curb its power to raise rents and turn on more discounting.

Also, shares of this Zacks Rank #3 (Hold) company have lost 7.6% in the past year compared with 4.9% decline recorded by the industry.

Stocks to Consider

Alpine Income Property Trust, Inc.’s (PINE - Free Report) Zacks Consensus Estimate for the ongoing-year FFO per share moved 20.2% north to $1.19 in the past month. The stock currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Arbor Realty Trust, Inc.’s (ABR - Free Report) FFO per share estimate for 2020 moved up 9.1% to $1.44 in the past month. The stock currently carries a Zacks Rank of 2.

Duke Realty Corporation’s Zacks Consensus Estimate for the current year’s FFO per share moved 2.8% north to $1.49 in a month’s time. The stock currently carries a Zacks Rank of 2.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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