Wells Fargo Downgrades PSA, SMA on Weaker Outlook

Downgrade Cites Concerns Over 2026 Growth Projections

Wells Fargo has adjusted its ratings for Public Storage (NYSE:PSA) and SmartStop Self Storage REIT Inc (NYSE:SMA), downgrading both to Equal Weight. The financial institution warned that recent gains in self-storage stocks are outpacing fundamentals amid projections for slower growth in 2026.

Sector Performance Ahead of Fundamentals

The self-storage sector has surged approximately 9% year-to-date, outperforming broader real estate indices. According to the Wells Fargo report, this growth is largely fueled by investor optimism tied to a potential housing market recovery rather than immediate operational trends. The bank suggests that stock valuations may be overly optimistic at present.

Future Outlook and Market Expectations

The primary driver for the downgrade is the expectation that guidance from self-storage landlords for the 2026 fiscal year will likely come in slightly below current Street consensus. This indicates a potential deceleration in the sector's growth trajectory, which may not support the recent rally in stock prices.

Summary and Key Factors

Investors are now monitoring whether the sector's underlying operational performance will align with its strong market valuation. Future earnings reports and forward-looking guidance for 2026 will be critical for determining the next trend for stocks like PSA and SMA.

FAQ

Q: Why were Public Storage and SmartStop downgraded?
A: Wells Fargo cited a weaker growth outlook for 2026 and concerns that stock price gains have run ahead of fundamental performance.

Q: What is the new rating for PSA and SMA?
A: Both companies were downgraded to Equal Weight.

Source: Investing.com