Equinix (EQIX - Analyst Report) is a real estate investment trust that provides data center services to protect and connect the information assets for the enterprises, financial services companies, and content and network providers. The company is based in Redwood City, California and employs over 3300 employees. The stockis Zacks Rank #1 (Strong Buy) and todays Bull of the Day.
Equinix has a market cap of $25 billion with a Forward PE of 26. The company has a dividend of 2% and expected EPS growth rate of 17%. In addition, the company also sits in an industry that is ranked 77 out of 265 (Top 29%) in the Zacks Industry Rank.
Early in August Equinix reported earnings, with an EPS beat of 30%. The company also beat on revenue, seeing $900.5 million on the quarter verse the $894 million expected. The company guided Q3 slightly below the $921 million expected, but guided fiscal year 2016 higher.
CEO Stephen M. Smith had some comments on the quarter:
"The second quarter marked another strong performance for Equinix as we delivered both revenues and adjusted EBITDA above the top end of our guidance ranges, and as the company recorded its 54th quarter of consecutive revenue growth... As digital transformation drives companies to evolve business models and operations, Equinix continues to serve as an important partner as reflected in our strong growth and market leadership position. During the quarter we made significant progress towards our goal of owning more of our real estate with the acquisition of two Paris data centers, and we commenced construction on DC12, our first data center build on our owned Ashburn North Campus. The Ashburn campus is the largest internet exchange point in North America, and this expansion will effectively double our owned capacity in this important market over the next few years."
Last quarters beat broke a losing streak for the company of 4 straight quarters of missing on EPS. Despite a full year of missing earnings, the stock continued higher, almost hitting $400 a share. The expansion and growth of the company hurt EPS during that period, but now the company looks to be hitting their numbers.
Since the company reported, estimates have been revised higher for both 2016 and 2017. Over the last 90 days, estimates for the current year are up 2%, from $13.00 to $13.32. For fiscal year 2017, estimates have gone 3.5% higher, from $16.06 to $16.61.
Recent Sell Off and Broker Targets
The stock has recently pulled back as interest rate hike fears cause sector rotation out of yielding stocks in the utility and REIT sectors. While the short-term fear might be justified an investor with a long-term approach should consider EQIX at these levels.
The stock is close to its 200 day moving average and considering that most brokers have targets much higher, there is a nice risk/reward scenario here.
According to Bigcharts.com, EQIX currently has 14 buy ratings, 2 overweights and 7 holds. Multiple brokers and analysts have price targets above $400 a share including:
Suntrust: Rated buy with $445 price target.
JP Morgan: Neutral with $428 price target.
Stifel: Buy with $418 price target.
The recent dip in price offers a long-term opportunity to enter a stock that has been trending higher over the last five years. The short term REIT sell off might be the only chance to get into this long-term winner.
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