PSA

Publicly traded companies mentioned herein: Alphabet Inc (GOOGL), Facebook Inc (FB), Public Storage (PSA)

Highlights

The presenter is bearish on Public Storage (PSA), a REIT that owns and operates self-storage facilities. He is bearish on the entire self-storage industry, citing the deterioration of profitability as customer acquisition shifts to online. Within self-storage, PSA’s lack of growth potential makes the stock an attractive short without significant risk, according to the presenter. He expects revenue growth to eventually turn negative, although he is unsure when that will occur. For 2020, he estimates revenue growth to fall from its current ~1.5% run rate to zero and NOI to decrease ~1%, yielding $10.60 FFO per share (just below the consensus $11 FFO per share estimate). PSA doesn’t share guidance, so it could take longer than otherwise “for reality to hit.” Once the 2020 consensus is reduced in 9 – 12 months, he expects the P/FFO multiple to fall from the near-peak ~23x current FFO to a more normal 18x – 20x range. This leads to a price target of $191 – $212 per share, representing 15% – 24% downside from the current ~$250 share price.