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Here's Why You Should Buy Public Storage (PSA) Stock Now

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Public Storage (PSA - Free Report) , a renowned self-storage real estate investment trust (REIT) in the United States, is well-positioned to benefit from favorable self-storage industry fundamentals, a robust balance sheet position and optimized technological processes.

The company operates in major metropolitan markets, with nearly half of the U.S. population living within a Public Storage trade area. Alongside its commendable brand recognition, the company is likely to gain from economies of scale. Moreover, PSA’s approximately 35% stake in Shurgard Self Storage SA — a well-established and valuable brand in Europe — will aid its profitability.

In addition, Public Storage has been carrying out acquisitions to maximize its growth opportunities. During first-quarter 2022, it acquired 10 self-storage facilities comprising 0.8 million net rentable square feet of area for $127.7 million. Subsequent to the March quarter end, PSA acquired or was under contract to buy 11 self-storage facilities spanning 0.9 million net rentable square feet of space across nine states for $147.2 million. Access to capital at low-interest rates has enabled it to take advantage of such potential opportunities.

In order to achieve revenue optimization and cost efficiency, the company has invested heavily in technology over the past few years. To enhance its move-in experience, PSA started the “eRental®” process in 2020, while last year, the company launched the Public Storage App, offering customers a new tool to access their properties through smartphones. These provide the company with a competitive edge over its peers.

Public Storage holds one of the strongest balance sheets in the sector. The company exited the first quarter with $940.5 million of cash and equivalents and has a decent debt maturity schedule which moderates its refinancing risks.  

Further, the company is expected to maintain its dividend payouts in the near future, given its robust financial position and a lower debt-to-equity ratio compared with the industry’s average.

Analysts seem to be bullish on this Zacks Rank #2 (Buy) stock. The estimate revisions trend for 2022 funds from operations (FFO) per share indicates a favorable outlook for the company as it has increased 1.2% over the past two months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

However, Public Storage operates in a highly fragmented market in the United States. It faces stiff competition from several private, regional and local operators.

The company engages in significant development and refurbishment activities. As of Mar 31, 2022, it had several facilities in development, with an estimated cost of $406.1 million and expansion projects worth $427.7 million. It expects to incur the remaining $496.2 million of development costs related to these projects over the next 18 to 24 months. While these help PSA’s prospects, the company is left exposed to operational risks associated with increasing construction costs, entitlement delays and failure to fulfill government requirements.

Shares of Public Storage have declined 8.2% in the past three months compared with the industry’s fall of 4.3%.

Zacks Investment Research
Image Source: Zacks Investment Research

Other Stocks to Consider

Some other top-ranked stocks in the REIT sector are Prologis (PLD - Free Report) , Extra Storage Space (EXR - Free Report) and Rexford Industrial Realty (REXR - Free Report) .

The Zacks Consensus Estimate for Prologis’ 2022 FFO per share has moved 1% upward in the past month to $5.15. PLD presently carries a Zacks Rank of 2.

The Zacks Consensus Estimate for Extra Storage Space’s ongoing year’s FFO per share has been raised 1.9% over the past month to $8.07. EXR carries a Zacks Rank #2, currently.

The Zacks Consensus Estimate for Rexford Industrial Realty’s current-year FFO per share has moved 1% northward in the past month to $1.93. REXR also carries a Zacks Rank of 2 at present.

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