WillScot Holdings Corp. (NASDAQ:WSC): Nothing Out of the Box

We came across a bearish thesis on WillScot Holdings Corp. (NASDAQ:WSC) on ValueInvestorsClub by Pop4Pres. In this article, we will summarize the bears’ thesis on WSC. The company’s shares were trading at $40.59 when this thesis was published, vs. the closing price of $35.27 on Jan 13.

A row of self-storage units in a self-storage complex, showing the affordability and security offered by the company.

WSC designs, delivers, and services onsite and on-demand space solutions in North America. It provides mobile offices, ground-level spaces, blast-resistant modules, clearspan structures and complexes, restrooms, containers, climate-controlled storage containers, and portable classrooms.

The business landscape suggests that there could be an imminent downfall for WSC. The pricing of its products is above peer standards. Modular Office space is available at a 10% premium while portable storage is offered at $200 or 33% above its competitors. It has also resorted to questionable pricing practices which have led to unfavorable customer response. Pick-up days have been changed to the 28^th instead of the actual month end. The firm has also been playing around with fine print to upcharge customers. It does not come as a surprise that the storage utilization rate has dropped from ~80% in Q4-19 to ~60% in Q3-24. Bad debt expense is also extremely high and stands at 18% of its AR compared to 1-2% for its peers.

The financial performance has not been steady in recent quarters. It has missed EBITDA guidance in Q3-23 and Q4-24 by 4% and 9%, a rare phenomenon for a company that had been able to exceed expectations for 17 quarters in a row. It also raises concern about the management’s understanding of a business that is lease-based and with a predetermined maturity.

Valuing a deteriorating business can be difficult since utilization levels are yet to bottom out. The EBITDA for 2025 and 2026 are projected to be ~$1 billion and $900 million, respectively. Using this metric, a more reasonable value of the stock is in the range of $22 and $33. With the current market price hovering around $35, there is still more downside to WSC.

While we acknowledge the potential of WSC as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than WSC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.