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On Wednesday, Berenberg analyst upgraded Big Yellow Group Plc shares (LON:BYG:LN) (OTC: BYLOF) from Hold to Buy, setting a new price target of GBP11.44, which reflects a decrease from the previous GBP12.85 target. This change follows Big Yellow (OTC:YELLQ)'s recent quarterly trading update that showed resilience in its business performance.
Big Yellow Group's third-quarter update, typically its seasonally weaker period, was noted for its positive outcomes, particularly when compared to its industry counterpart, Safestore's full-year 2024 results. The storage company reported a 2% increase in overall move-ins year-over-year, maintained occupancy levels, and achieved a 2% rise in net rent per square foot from the same quarter the previous year.
Based on these results, Big Yellow's management anticipates modest earnings per share (EPS) growth for the full year. Berenberg's forecast aligns with this expectation, predicting a 2.3% increase in EPS to 57.2p. This stands in contrast to the projection for Safestore, where another year of declining EPS is expected.
Both Big Yellow and Safestore have experienced a devaluation in the stock market over the past year, with current price-to-earnings (P/E) ratios hovering around 15-16x, a significant drop from the over 20x ratios seen in the past decade.
Despite the market's re-rating, Berenberg's outlook for Big Yellow is optimistic in the near term, citing reasons such as the company's staggered development pipeline, robust organic growth, and the stabilization of operating cost inflation.
Battersby's assessment concludes that the current weakness in Big Yellow's share price presents a buying opportunity. The adjusted price target is based on 20 times Berenberg's fiscal year 2025 estimated EPS, indicating a potential 23% upside in the stock's value.
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