Will This Downgrade Hurt Extra Space Storage (EXR) Stock Today?

NEW YORK (TheStreet) -- Extra Space Storage (EXR) stock has been downgraded to "hold" from "buy," Jefferies said Thursday. The firm said the company is reaching an inflection point and growth is set to slow. A $53 price target was set. 

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Separately, TheStreet Ratings team rates EXTRA SPACE STORAGE INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate EXTRA SPACE STORAGE INC (EXR) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, compelling growth in net income, expanding profit margins and growth in earnings per share. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 8.3%. Since the same quarter one year prior, revenues rose by 24.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the Real Estate Investment Trusts (REITs) industry average, but is less than that of the S&P 500. The net income increased by 18.8% when compared to the same quarter one year prior, going from $31.43 million to $37.34 million.
  • 41.20% is the gross profit margin for EXTRA SPACE STORAGE INC which we consider to be strong. Regardless of EXR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, EXR's net profit margin of 23.92% compares favorably to the industry average.
  • EXTRA SPACE STORAGE INC has improved earnings per share by 14.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, EXTRA SPACE STORAGE INC increased its bottom line by earning $1.51 versus $1.13 in the prior year. For the next year, the market is expecting a contraction of 9.6% in earnings ($1.37 versus $1.51).

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