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What You Lost by Not Adding Equinix (EQIX) to Your Portfolio
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Shares of Equinix Inc. (EQIX - Free Report) have been gaining solid momentum of late. One of the major reasons behind this could be the company’s better-than-expected top-line results for first-quarter 2016, along with an upbeat guidance for the full year.
Since the company reported last quarterly results on May 4, the stock has gained over 11% and touched a new 52-week high of $374.39 yesterday. Moreover, year-to-date the stock has gained nearly 27%.
Though Equinix’s bottom-line results fell short of the Zacks Consensus Estimate, a robust top line and an upbeat guidance for the full year have gone a long way in instilling investor confidence in the stock.
Equinix’s first-quarter revenues not only surpassed the Zacks Consensus Estimate but also increased over 31% from the year-ago quarter. The improvement was driven mainly by strong bookings activity, net positive pricing actions, and the Telecity and Bit-isle acquisitions.
However, the company’s adjusted funds from operations (AFFO) missed the Zacks Consensus Estimate and also witnessed a year-over-year decline. Earnings were weak mainly due to a rise in operating expenses and a higher share count, which more than offset the benefit from strong top-line growth.
Nevertheless, Equinix expects the recently completed acquisitions to drive the top and the bottom lines. This has led the company to raise its full-year guidance for both earnings and revenues.
Meanwhile, the stock’s share price appreciation can be attributed to management’s aggressive efforts on developing data centers across different geographies. Keeping up with last year’s initiatives, the company has announced an aggressive expansion plan for 2016.
The plan targets an investment of over $4.5 billion this year in data center openings, expansion of colocation space and acquisitions. It includes $3.8 billion for the Telecity acquisition, which was completed this January.
Expansion in important markets and consolidation of facilities in the existing ones are an important aspect of Equinix's core growth strategy. The company strives to enhance its revenue base and improve profitability by offering upgraded technology to attract clients. Moreover, a recurring revenue model has provided much needed support to the company's revenue stream over the years. The company's cloud and IT service businesses are its fastest growing segments and account for roughly one-fourth of its total revenue.
However, intensifying competition from established Internet data center operators such as AT&T (T - Free Report) and CenturyLink Inc. may hurt product pricing, thereby denting Equinix’s margins.
The company’s European exposure, highly leveraged balance sheet and industry consolidation add to its woes.
Equinix currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the broader technology sector is Saul Centers Inc. (BFS - Free Report) carrying a Zacks Rank #2 (Buy).
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What You Lost by Not Adding Equinix (EQIX) to Your Portfolio
Shares of Equinix Inc. (EQIX - Free Report) have been gaining solid momentum of late. One of the major reasons behind this could be the company’s better-than-expected top-line results for first-quarter 2016, along with an upbeat guidance for the full year.
Since the company reported last quarterly results on May 4, the stock has gained over 11% and touched a new 52-week high of $374.39 yesterday. Moreover, year-to-date the stock has gained nearly 27%.
Though Equinix’s bottom-line results fell short of the Zacks Consensus Estimate, a robust top line and an upbeat guidance for the full year have gone a long way in instilling investor confidence in the stock.
Equinix’s first-quarter revenues not only surpassed the Zacks Consensus Estimate but also increased over 31% from the year-ago quarter. The improvement was driven mainly by strong bookings activity, net positive pricing actions, and the Telecity and Bit-isle acquisitions.
However, the company’s adjusted funds from operations (AFFO) missed the Zacks Consensus Estimate and also witnessed a year-over-year decline. Earnings were weak mainly due to a rise in operating expenses and a higher share count, which more than offset the benefit from strong top-line growth.
Nevertheless, Equinix expects the recently completed acquisitions to drive the top and the bottom lines. This has led the company to raise its full-year guidance for both earnings and revenues.
Meanwhile, the stock’s share price appreciation can be attributed to management’s aggressive efforts on developing data centers across different geographies. Keeping up with last year’s initiatives, the company has announced an aggressive expansion plan for 2016.
The plan targets an investment of over $4.5 billion this year in data center openings, expansion of colocation space and acquisitions. It includes $3.8 billion for the Telecity acquisition, which was completed this January.
Expansion in important markets and consolidation of facilities in the existing ones are an important aspect of Equinix's core growth strategy. The company strives to enhance its revenue base and improve profitability by offering upgraded technology to attract clients. Moreover, a recurring revenue model has provided much needed support to the company's revenue stream over the years. The company's cloud and IT service businesses are its fastest growing segments and account for roughly one-fourth of its total revenue.
However, intensifying competition from established Internet data center operators such as AT&T (T - Free Report) and CenturyLink Inc. may hurt product pricing, thereby denting Equinix’s margins.
The company’s European exposure, highly leveraged balance sheet and industry consolidation add to its woes.
Equinix currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the broader technology sector is Saul Centers Inc. (BFS - Free Report) carrying a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>