CubeSmart upgraded to Outperform by BMO Capital

Investing.com -- BMO Capital on Friday upgraded CubeSmart (NYSE:CUBE) to Outperform from Market Perform on Friday, setting a price target of $49.

The upgrade comes as BMO raised its 2025 same-store revenue growth expectation to 0.3% year-over-year, an increase of 50 basis points from its previous forecast.

Analysts expect management will raise guidance from the current -1.0% year-over-year projection, driven by solid acceleration of in-place rates.

BMO’s 2025/2026 funds from operations (FFO) estimates now stand 110 and 220 basis points above consensus, respectively.

The firm has made CubeSmart its top pick in the storage sector, citing the company’s high-quality urban portfolio that offers attractive relative growth with lower risk.

CubeSmart’s urban exposure, with 90% of net operating income (NOI) coming from top-40 metropolitan statistical areas (MSAs), positions it to outperform peers.

The company’s presence in New York City, which accounts for 16.6% of NOI, is particularly valuable as it’s less sensitive to housing market fluctuations compared to other major U.S. cities.

The storage company maintains a strong balance sheet with net debt to EBITDA at 4.8x and 89% fixed-rate debt.

This financial position provides both defense against potential economic deterioration and flexibility for acquisitions. CubeSmart has recently shown interest in external growth opportunities, including its Heitman joint venture consolidation in Dallas worth $453 million.

From a valuation perspective, CubeSmart trades at a modest 1.1x discount on 2025 FFO compared to competitors Extra Space Storage (NYSE:EXR) and Public Storage, below its five-year average discount of 1.7x.

BMO believes this gap could narrow given same-store upside and solid expected 2026 FFO growth.

The upgrade coincides with BMO’s downgrade of Public Storage (NYSE:PSA) to Market Perform from Outperform, while maintaining an equal weight stance on the storage sector within REITs.

Potential risks to BMO’s thesis include CubeSmart’s lower exposure to Sunbelt markets, which might show higher growth in a recovery scenario.

The company also faces higher localized supply in markets like Denver, Phoenix, New York/New Jersey, Miami, Boston and Washington DC.

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