UBS Downgrades CubeSmart (CUBE) to Neutral

UBS analyst Mike Goldsmith downgraded CubeSmart (NYSE: CUBE) from Buy to Neutral with a price target of $54.00 (from $53.00).

The analyst comments: "We downgrade CUBE to Neutral from Buy as we think its current valuation more appropriately prices in the outlook for self storage fundamentals. CUBE's total return since July 1 of +21% outperformed REITs by +590 bps & Storage by +100 bps. Over the period, its NTM P/FFO rose to 20x from 17x despite unchanged fundamentals. As such, we see limited further valuation upside. Our investment case on CUBE was that its urban-focused portfolio would demonstrate lower beta as housing turnover slowed. However, its SSRev underperformed peers by -70 bps since 2022. We think CUBE's SSRev modestly trails peers as they eventually see greater benefit from improving housing turnover in more suburban markets. There isn't clarity when housing turnover will improve, but mortgage rates are trending lower (currently 6.4% vs. peak of 7.9%) and active housing listings are up 35% yr/yr. Plus, CUBE lacks idiosyncratic drivers peers have (EXR/LSI brand harmonization, PSA non-SS pool, NSA PRO internalization). We model CUBE 2025E SSRev of 0.6% (cons. 1.3%). Overall, we see the valuation as more appropriate at current levels. The Storage subsector trades at a 32% premium to REITs (5-yr avg 25%) & CUBE trades a discount to the Storage average of -2% (5-yr avg -4%)."

For an analyst ratings summary and ratings history on CubeSmart click here. For more ratings news on CubeSmart click here.

Shares of CubeSmart closed at $53.92 yesterday.

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