EXR Rallies 15% in 3 Months: Time to Buy, Hold or Sell the Stock?

Extra Space Storage Inc. EXR, the largest self-storage REIT in the United States, has seen its share price climb 15.5% over the past three months, outperforming its industry’s rise of 10.3%. Its peers like Public Storage PSA have gained 7.5%, while National Storage Affiliates Trust NSA has declined 2.9% over the same time frame. 

With this impressive rally of EXR, what comes to investors’ minds is whether it's time to buy, hold or cash in on gains. While the fundamentals remain robust and the long-term outlook is constructive, current valuations and macroeconomic uncertainties suggest a "Hold" stance may be the most prudent approach.

Moreover, solid dividend payouts are arguably the biggest enticement for REIT investors, and Extra Space Storage remains committed to increasing shareholders’ wealth. In the past five years, the company has increased its dividend six times, and the five-year annualized dividend growth rate is 12.61%.

What’s Behind EXR’s Rally?

Extra Space stock’s momentum over the past three months reflects a mix of operational strength, improving investor sentiment and broader market tailwinds for REITs. The company’s first-quarter 2025 results exhibited solid performance with core funds from operations (FFO) per share of $2.00, beating the Zacks Consensus Estimate of $1.96. The figure increased 2% from the prior-year quarter. Same-store occupancy stood at a healthy 93.4%.

In addition to organic growth, Extra Space continues to expand strategically. In the first quarter of 2025, Extra Space Storage acquired 12 operating stores for $153.8 million. In association with its JV partners, EXR acquired two operating stores and completed the development of one store for a total cost of around $38.3 million, of which the company invested $24.5 million. In the first quarter of 2025, the company added 113 stores (100 stores net) to its third-party management platform.

Moreover, self-storage demand remains supported by lifestyle shifts such as downsizing, migration and remote work. These secular tailwinds have kept occupancy relatively strong. The self-storage asset category is need-based and recession-resilient in nature. This asset class has low capital expenditure requirements and generates high operating margins. 

Extra Space Storage also focuses on improving its balance sheet, reducing secured debt and increasing the size of its unencumbered pool. As of March 31, 2025, EXR's percentage of fixed-rate debt to total debt was 78.8%, and the net debt to EBITDA was 5.3X. As of the same date, the percentage of unencumbered asset value to total asset value was 83.4%. Its dividend yield of approximately 4.2% offers a decent income stream, especially for long-term income-focused investors.

The dividend remains well-covered by FFO, and management has historically demonstrated a disciplined approach to capital allocation. However, given the elevated interest rate environment, growth via acquisitions may be slower or more selective in the near term.

EXR’s Estimate Revisions

The Zacks Consensus Estimate for 2025 core FFO per share has also climbed marginally over the past two months. 

EXR Shares Are Expensive

While Extra Space’s fundamentals are solid, the stock’s valuation has become somewhat stretched after its recent run. It has a Value Score of D. It currently trades at a forward price-to-FFO multiple of roughly 18.38X — higher than its industry and close to its one-year median. 

The stock is also expensive than its peers, including Public Storage and National Storage Affiliates. Shares of Public Storage and National Storage Affiliates Trust are currently trading at a forward price-to-FFO multiple of 17.23X and 13.84X, respectively.

Headwinds to EXR’s Momentum

While REITs, in general, rebound as expectations of interest rate cuts strengthen, the timing and pace of rate reductions remain uncertain, and self-storage is not immune to economic slowdowns. 

Additionally, the company continues to see new customer price sensitivity and is likely to face headwinds from lower new customer rates in the near term. As such, the reacceleration in revenue growth is expected to be challenging until the company regains pricing power with new customers. Reflecting this environment, the company’s full-year 2025 guidance assumes negative 0.75% to 1.25% growth in same-store revenues. Same-store net operating income (NOI) is projected in the band of negative 3.00% to 0.25% growth.

End Note on EXR

After a 15% run-up, Extra Space Storage presents a mixed investment case. The company remains a sector leader with a proven track record, strong cash flows and an attractive dividend. Its long-term prospects are underpinned by favorable demographic and lifestyle trends, along with the ongoing expansion of its managed portfolio. 

However, the recent rally has priced in much of the near-term upside. With a stretched valuation and macroeconomic uncertainties still looming, it seems prudent for investors to maintain their positions in EXR while monitoring upcoming earnings and macro developments. New investors may want to wait for a pullback before initiating a position.

Extra Space Storage currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Note: Anything related to earnings presented in this write-up represents FFO, a widely used metric to gauge the performance of REITs.

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This article originally published on Zacks Investment Research (zacks.com).

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