Big Yellow Group (BYG) Stock Upgraded to Buy: Analyst Sees Significant Upside Potential

Citi upgraded shares of self-storage company Big Yellow Group (LON: BYG) to Buy from Neutral in a note to clients last week, setting a price target of 1,525p on the stock.

The new target represents a potential upside of 28% from the current share price.

Analysts at the investment bank told investors that they believe Big Yellow is well-positioned to weather the ongoing economic challenges.

Citi highlights the company's “proven relatively defensive performance” during the 2008/09 financial crisis. Furthermore, Citi expects Big Yellow to continue delivering earnings per share (EPS) growth, even as the broader economy slows down.

“As real estate markets navigate the remaining macro-economic consequences of tightened monetary policy of slowing growth associated with curbing inflation, Big Yellow offers proven relatively defensive performance in the previous cyclical tough of 2008/09, EPS growth beyond an anticipated slowdown impact this year and continued asset value and NAV growth support,” wrote the firm.

The investment bank is also bullish on the company's asset value and net asset value (NAV) growth.

Citi anticipates that as the economic cycle turns, Big Yellow's valuation multiple will expand, driving share price appreciation.

“Our confidence is building about the beginning of the next cycle and we expect valuation multiple expansion ahead of fundamental growth,” Citi comments.

Based on the bank's estimates and its assessment of the average historical growth cycle multiples, it sees a valuation corridor of up to around 1,700p a share, “indicating significant upside potential” for Big Yellow Group shares.