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Here's Why You Should Hold on to Iron Mountain (IRM) Stock Now
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Iron Mountain Incorporated (IRM - Free Report) has been increasingly focusing on the expansion of its data center segment amid concerns of a continued decline in North American Records and Information Management volumes.
Notably, the company’s global data center platform consists of 15 operational facilities across 13 markets that can support more than 350 MW of IT capacity at full build-out. It assembled this portfolio through acquisitions, expansion projects and development efforts that offer a long growth runway.
Markedly, with growth in cloud computing, Internet of Things and big data, and an increasing number of companies opting for third-party IT infrastructure; data-center REITs are witnessing a boom in Phoenix as well as worldwide. Furthermore, the growth rates for the artificial intelligence, autonomous vehicle and virtual/augmented reality markets are estimated to remain robust over the next five to six years.
Apart from these, data centers are poised to benefit from the heightening reliance on technology in the wake of the coronavirus pandemic. As such data-center landlords, including Iron Mountain, Digital Realty (DLR - Free Report) , Equinix, Inc. (EQIX - Free Report) and CoreSite Realty Corporation (COR - Free Report) , will likely keep witnessing significant demand.
Moreover, with a robust leasing pipeline for the fourth quarter, management’s full-year leasing outlook is more than 55 megawatts, remarkably up from the originally mentioned 15-20 megawatts. Additionally, the company aims for the data center business to account for 10% of total adjusted EBITDA by the end of 2020. As such, the efforts will diversify its revenue mix and improve adjusted EBITDA margins.
Iron Mountain has traditionally enjoyed a steady stream of recurring revenues from its core storage and record management businesses. In fact, the company derives the majority of its revenues from fixed periodic storage rental fees charged to customers based on the volume of their records stored. It has enjoyed a consistent box retention rate of 98%, with more than 50% of its boxes staying in the facilities for 15 years on average.
Another positive for the company is advancement in its efficiency/cost-saving initiative program — Project Summit — which is expected to generate adjusted EBITDA of $165 million in 2020 and $375 million exiting 2021.
Further, Iron Mountain is focusing on capital recycling, by monetizing non-core assets and entering joint ventures, using sale proceeds to fund the development pipeline. Since the start of 2020 through Dec 3, proceeds from such efforts aggregated to nearly $120 million, ahead of management’s full-year outlook of $100 million.
However, increasing emphasis on a paperless society remains a secular headwind for Iron Mountain. Specifically, as archiving of original hard-copy documents losses its relevance, paper needs are shrinking at the enterprise level. This along with shifts in data storage through non-paper based technologies is resulting in the reduction of physical storage volume and low demand for the handling of records. This is affecting service activity levels and record management volume, especially in North America.
Moreover, moderation in economic activity amid the pandemic is likely to have impacted physical storage business volumes. Net organic storage volume is expected to decline 1-1.5% in 2020, per management.
Also, continued weakness in recycled paper prices is impacting organic service revenue growth.
The pandemic has led to numerous shutdowns of businesses and an increase in remote-working policies across companies, resulting in a slowdown in the service activity level, thereby, affecting Iron Mountain’s service business.
Further, in the third quarter, Iron Mountain witnessed a year-over-year fall of 31% in new boxes inbounded, and a 39% decline for retrievals and re-files. These declines are likely to continue in the fourth quarter as well, thereby, hindering Iron Mountain’s growth tempo.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Shutterstock
Here's Why You Should Hold on to Iron Mountain (IRM) Stock Now
Iron Mountain Incorporated (IRM - Free Report) has been increasingly focusing on the expansion of its data center segment amid concerns of a continued decline in North American Records and Information Management volumes.
Notably, the company’s global data center platform consists of 15 operational facilities across 13 markets that can support more than 350 MW of IT capacity at full build-out. It assembled this portfolio through acquisitions, expansion projects and development efforts that offer a long growth runway.
Markedly, with growth in cloud computing, Internet of Things and big data, and an increasing number of companies opting for third-party IT infrastructure; data-center REITs are witnessing a boom in Phoenix as well as worldwide. Furthermore, the growth rates for the artificial intelligence, autonomous vehicle and virtual/augmented reality markets are estimated to remain robust over the next five to six years.
Apart from these, data centers are poised to benefit from the heightening reliance on technology in the wake of the coronavirus pandemic. As such data-center landlords, including Iron Mountain, Digital Realty (DLR - Free Report) , Equinix, Inc. (EQIX - Free Report) and CoreSite Realty Corporation (COR - Free Report) , will likely keep witnessing significant demand.
Moreover, with a robust leasing pipeline for the fourth quarter, management’s full-year leasing outlook is more than 55 megawatts, remarkably up from the originally mentioned 15-20 megawatts. Additionally, the company aims for the data center business to account for 10% of total adjusted EBITDA by the end of 2020. As such, the efforts will diversify its revenue mix and improve adjusted EBITDA margins.
Iron Mountain has traditionally enjoyed a steady stream of recurring revenues from its core storage and record management businesses. In fact, the company derives the majority of its revenues from fixed periodic storage rental fees charged to customers based on the volume of their records stored. It has enjoyed a consistent box retention rate of 98%, with more than 50% of its boxes staying in the facilities for 15 years on average.
Another positive for the company is advancement in its efficiency/cost-saving initiative program — Project Summit — which is expected to generate adjusted EBITDA of $165 million in 2020 and $375 million exiting 2021.
Further, Iron Mountain is focusing on capital recycling, by monetizing non-core assets and entering joint ventures, using sale proceeds to fund the development pipeline. Since the start of 2020 through Dec 3, proceeds from such efforts aggregated to nearly $120 million, ahead of management’s full-year outlook of $100 million.
Iron Mountain currently carries a Zacks Rank #3 (Hold). The company’s shares have gained 4.5% against the industry’s decline of 1.3% over the past three months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
However, increasing emphasis on a paperless society remains a secular headwind for Iron Mountain. Specifically, as archiving of original hard-copy documents losses its relevance, paper needs are shrinking at the enterprise level. This along with shifts in data storage through non-paper based technologies is resulting in the reduction of physical storage volume and low demand for the handling of records. This is affecting service activity levels and record management volume, especially in North America.
Moreover, moderation in economic activity amid the pandemic is likely to have impacted physical storage business volumes. Net organic storage volume is expected to decline 1-1.5% in 2020, per management.
Also, continued weakness in recycled paper prices is impacting organic service revenue growth.
The pandemic has led to numerous shutdowns of businesses and an increase in remote-working policies across companies, resulting in a slowdown in the service activity level, thereby, affecting Iron Mountain’s service business.
Further, in the third quarter, Iron Mountain witnessed a year-over-year fall of 31% in new boxes inbounded, and a 39% decline for retrievals and re-files. These declines are likely to continue in the fourth quarter as well, thereby, hindering Iron Mountain’s growth tempo.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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