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Here's Why You Should Retain Iron Mountain (IRM) Stock Now

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Iron Mountain Incorporated (IRM - Free Report) is strengthening its data-center platform through expansion projects and development efforts. However, the pandemic has caused a slowdown in service activity levels, thereby, affecting the company’s organic service business growth.

In February, the company entered a joint venture with Web Werks, which once closed, will expand Iron Mountain’s reach to India, particularly in Mumbai, Pune and Delhi NCR. Given anticipated robust growth in the India data-center market, the move is a strategic fit.

Further, amid strong demand for connectivity, interconnection and colocation space, which has been driving leasing activity, management’s leasing outlook for 2021 is pegged at 25-30 megawatts, indicating solid annual booking growth.

Moreover, the company is focusing on capital recycling by monetizing non-core assets and entering joint ventures and sale-leaseback transactions, using sale proceeds to fund the development pipeline.

Its aggressive expansion strategy is backed by a solid liquidity position that stood at $2 billion at 2020 end. Furthermore, with a weighted-average debt maturity of 7.6 years, it has ample financial flexibility to meet its near-term debt obligations and other capital commitments that are manageable.

Its core storage and record management businesses also remain resilient, with the company deriving the majority of its revenues from fixed periodic (usually earned on a monthly basis) storage rental fees charged to customers based on the volume of their records stored. Given Iron Mountain’s initiatives to expand its core storage business, the company is likely to see robust organic storage rental revenue growth in the near term.

However, declining paper needs at the enterprise level along with the shifts in data storage through non-paper-based technologies are resulting in physical storage volume erosion and low demand for the handling of records. This is affecting service activity levels and records management volumes.

Moreover, moderation in economic activity amid the pandemic is likely to impact physical storage business volumes. In addition, the digitization of records might shift its revenue mix from the more-predictable storage revenues to service revenues that are more volatile.

Also, continued weakness in recycled paper prices is likely to hinder organic service revenue growth and EBITDA. Given Iron Mountain’s international footprint, the company often faces unfavorable foreign-currency movements, which affects top-line growth.

Shares of this Zacks Rank #3 (Hold) company have jumped 49.7% over the past year compared with the industry’s growth of 39.6%.

 

 

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Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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