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Equinix Buys Land in Ashburn for IBX Data Center Expansion

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Expansion in important markets and consolidation of facilities in existing ones have been an important part of Equinix Inc.'s (EQIX - Free Report) core strategy. In line with the strategy, the company recently purchased 34.5 acres of land in Ashburn for a total consideration of $34.5 million. The property buyout is expected to help Equinix in increasing its footprint at North America’s largest internet peering point.

The total land was divided into four parcels and is close to Equinix's current Ashburn data center campus. The new land will be used to build multiple greenfield International Business Exchange (IBX) data centers.

Buying Ashburn Property Makes Sense

Ashburn is located in Loudoun County, VA, which is just outside the Washington DC. Equinix currently operates 10 IBX data centers in the Washington DC which covers more than 500,000 square feet area and over 850 customers. This makes it the largest internet exchange point in North America and one of the largest in the world.

Out of the 10 IBX data centers in the Washington DC, eight are located in Ashburn. The company revealed that the newly purchased land will encompass five new facilities which will cover over 1 million square feet.

Furthermore, by quoting Kelly Morgan, Research Vice President, Services of 451 Research, Equinix explained the importance of investing in Ashburn. According to Morgan, "Northern Virginia is the largest multi-tenant datacenter (MTDC) market in the U.S. by operational square feet and will continue to grow rapidly, as several new facilities are expected to come online in the next one to two years. The market has seen consistently strong demand, enabling providers like Equinix to fill large builds quickly. Northern Virginia not only attracts datacenter tenants from all over the globe interested in connectivity, but providers there serve government agencies and local businesses."

The recent investment in Ashburn property is part of Equinix’s ongoing strategy of increasing its ownership assets across various regions. Per the company, in the past four quarters it has purchased land to expand key campuses across Ashburn, Silicon Valley and Chicago. Apart from this, it has purchased IBX buildings in Amsterdam, Paris and Rio de Janeiro.

Bottom Line

Equinix remains positive on the growing demand for data centers. To meet the growing demand for cloud services, the global interconnection and data center company is expanding its IBX data centers globally and gaining popularity among tech companies looking for data management. Thus, the company expects its total addressable market for retail data centers to increase at a CAGR of 8% from 2013 to 2017 and reach $24.0 billion. Based on this projection, Equinix projects a revenue growth rate of 10% through 2017.

Therefore, we believe that by expanding its data center assets, Equinix will be in a better position to capitalize on this opportunity. Furthermore, the expansion will help the company to further strengthen its global footprint and bring in additional revenues.

Shares of Equinix have been steadily trading higher on a year-to-date basis. The stock generated a return of approximately 4.6% compared with the Zacks REIT-Equity Trust industry’s gain of just 0.7%.

Currently, Equinix carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include Applied Optoelectronics, Inc. (AAOI - Free Report) , NVE Corporation (NVEC - Free Report) and AXT Inc. (AXTI - Free Report) . Applied Optoelectronics and NVE Corporation sport a Zacks Rank #1 (Strong Buy) while AXT Inc. carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Applied Optoelectronics has witnessed upward estimate revisions for 2017 and 2018 in the last seven days and has surpassed the Zacks Consensus Estimate thrice in the trailing four quarters with an average positive surprise of 116.49%.

Estimates for NVE Corporation have also moved up in the last 60 days. It has surpassed the Zacks Consensus Estimate in the trailing four quarters with an average positive surprise of 14.05%.

AXT Inc. has witnessed upward estimate revisions for 2017 and 2018 in the last seven days. It has surpassed the Zacks Consensus Estimate in all the trailing four quarters with an average positive surprise of 118.75%.

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