Berenberg downgrades Big Yellow to 'hold'

Berenberg downgraded its stance on shares of self-storage company Big Yellow to ‘hold’ from ‘buy’ on Tuesday, with the share price now closer to its fair value after the stock rallied 21% since the bank’s upgrade note in March.

"For the longer term, we believe the company’s outlook is exceptional, with structural growth tailwinds in UK self-storage, and the likelihood that future land opportunities will emerge from the current crisis," Berenberg said. "However, it is less clear what the next catalyst will be for shares, with limited room for a re-rating and little chance for a positive earnings surprise. As a result, we downgrade our recommendation."

The bank said near-term upside has been largely realised from the company’s re-rating since lows in March.

In addition, Berenberg said it has brought its estimates down by 3% to 7% following the equity raise in April and full-year results in June.

"In our view, the company is more protected and much better understood by investors as the UK looks ahead to a likely weaker economic outlook following the Covid-19 pandemic.

"This is evidenced by both its recent trading (which has remained remarkably stable since the start of the UK’s lockdown) and the rapid share price recovery after falls in March, as the market quickly realised the opportunity to invest in Big Yellow’s highly reliable long-term growth story."

Berenberg maintained its 1,050p price target.

At 1035 BST, the shares were up 2.1% at 1,049p.