On Wednesday, BMO Capital adjusted its stance on CubeSmart (NYSE:CUBE), a self-storage real estate company, downgrading the stock from Outperform to Market Perform. The firm also set a new price target for CubeSmart shares at $47.00.
The downgrade reflects a growing caution regarding the storage sector's fundamentals. BMO Capital expressed concerns about potential downside risks to the sector and CubeSmart's same-store guidance in light of the upcoming second-quarter 2024 results. The analyst cited CubeSmart's valuation, which is currently seen as modestly elevated compared to its peers when looking at historical data.
BMO Capital's outlook for the company's future funds from operations (FFO) is also less optimistic than the consensus, with projections for 2025 being 2.6% lower than the average Street forecast. This cautious approach is further supported by recent web scraping data, which suggests that CubeSmart's street rates are weakening compared to its competitors.
The analyst highlighted the risk involved with the guidance provided by CubeSmart, especially considering the possibility that street rates may not increase year-over-year by fall as anticipated. This development could impact the company's performance and investor sentiment.
CubeSmart's stock rating adjustment and the new price target reflect the analyst's latest analysis of the company's standing within the broader storage sector and its financial outlook.
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