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On Wednesday, KeyBanc Capital Markets reiterated its Overweight rating and $47.00 price target for CubeSmart (NYSE:CUBE) shares, a self-storage REIT with a market capitalization of $9.62 billion. Analyst Todd Thomas from KeyBanc provided insights following the company’s first-quarter results for 2025. Thomas highlighted that CubeSmart’s performance is exceeding expectations and that the upward revision of management’s guidance still appears conservative. According to InvestingPro data, the company maintains a GREAT financial health score of 3.06, suggesting strong operational fundamentals.
The company saw a significant improvement in April, with move-in rents decreasing by only 2% year-over-year compared to a 8.3% year-over-year decrease in the first quarter of 2025 and a 10% decrease in the fourth quarter of 2024. This improvement led to a narrower rent rolldown, which is the spread between move-out and move-in rents. Thomas anticipates this spread will continue to close in the coming months. The company has demonstrated consistent shareholder returns, maintaining dividend payments for 21 consecutive years, with a current attractive dividend yield of 4.95%.
Additionally, occupancy rates are expected to rise as the peak rental season approaches. The positive quarterly results and a higher net operating income (NOI) run rate suggest that consensus estimates for both 2025 and 2026 may be revised upwards.
KeyBanc’s continued endorsement of CubeSmart’s stock is also based on the current valuation, which is seen as attractive. CubeSmart’s shares are trading at an 8.5% adjusted funds from operations (AFFO) multiple discount compared to the Self Storage Real Estate Investment Trust (REIT) subsector, with a P/E ratio of 24.88x. Moreover, the stock’s implied capitalization rate is 5.5%, aligning with the subsector’s average. InvestingPro analysis suggests the stock is slightly undervalued, with additional insights available in the comprehensive Pro Research Report, part of the coverage of 1,400+ top US stocks.
In his commentary, Thomas expressed confidence in the narrowing of the move-out/move-in rent spread and the likely swell in occupancy, which collectively underpin the firm’s positive outlook on CubeSmart’s stock. KeyBanc’s stance remains firm with an Overweight rating and a $47 price target, reflecting a positive view on the company’s financial prospects. The company has demonstrated strong returns over the past five years, and subscribers to InvestingPro can access additional financial metrics and expert analysis to make more informed investment decisions.
In other recent news, CubeSmart reported its first-quarter 2025 earnings, surpassing expectations with an earnings per share (EPS) of $0.64, compared to the forecasted $0.40. The company also exceeded revenue forecasts, reporting $273.04 million against an expected $263.4 million. CubeSmart’s performance reflected resilience, with improvements in urban markets like New York and Chicago contributing to its results. Additionally, the company completed the acquisition of its joint venture partner’s interest in a high-quality portfolio, expanding its market presence. Analysts from firms such as Bank of America and Citi noted CubeSmart’s solid demand and operational efficiencies. Despite broader economic uncertainties, CubeSmart maintains a cautious yet optimistic outlook for 2025, focusing on gradual improvements in operational metrics. The company’s strategic focus includes enhancing top-line growth while managing expense growth expectations.
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