What Is the Market Sentiment on EXR?

By Kent Smith • Wednesday, November 02 12:00 • Permanent Link

Extra Space Storage plummeted -8.8% this morning and underperformed the S&P 500 by -8.4%. The Industrial Real Estate Investment Trust stock is now trading at $162.17 per share and is -22.75% below its average target price of $209.92. Analysts have set target prices ranging from $153 to $248 dollars per share, and have given the stock an average rating of buy.

The market seems to share this optimistic view, since Extra Space Storage has a short interest of only 3.8% (this is the percentage of the share float that is being shorted). Each short position represents an investor's expectation that the price of the stock will decrease in the future.

Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.

One way to get an idea of the market sentiment on a stock is to check its rate of institutional ownership. In the case of Extra Space Storage, institutional investors own 98.4% of the shares, which indicates they have a very high stake in the company. What does this really tell us?

Institutional investors such as hedge funds, investment firms, and wealth managers devote significant resources to identifying good investments. If they have decided to invest in EXR, it probably means they believe it is a solid investment choice.

But it could also mean they are buying up shares in an effort to acquire the company or to get seats on the board of directors. Also bear in mind that institutions are fallible (just maybe not quite as fallible as the average retail investor), so they may simply be wrong when they think they've found a good stock.

To sum up, Extra Space Storage is probably the subject of exuberant market sentiment because of its an analyst consensus of strong upside potential, a buy rating, an average amount of shares sold short, and a significant number of institutional investors. At Market Inference, we believe that any investment decision should be preceded by an in-depth analysis of the company's fundamental values and a comparison with similar stocks.

Here's a snapshot of some important facts to keep in mind about EXR:

The stock has trailing 12 month earnings per share (Eps) of $6.64
Extra Space Storage has a trailing 12 month Price to Earnings (P/E) ratio of 24.4 compared to the S&P 500 average of 15.97
The company has a Price to Book (P/B) ratio of 6.8 in contrast to the S&P 500's average ratio of 2.95
Extra Space Storage is a Real Estate company, and the sector average P/E and P/B ratios are 27.16 and 2.39 respectively

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The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.