We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Here's Why It's Wise to Retain Digital Realty (DLR) Stock Now
Read MoreHide Full Article
Digital Realty (DLR - Free Report) is poised to grow on accretive acquisitions and development efforts amid robust demand for data centers. A solid balance-sheet position also acts as a tailwind. However, with stiff competition in the industry, aggressive pricing pressure is a concern.
High growth in cloud computing, the Internet of Things and big data, and an elevated demand for third-party IT infrastructure are spurring demand for data-center infrastructure. Moreover, growth in artificial intelligence, autonomous vehicle and virtual/augmented reality markets is anticipated to be robust over the next five to six years.
Demand is strong in top-tier data center markets and despite enjoying high occupancy, these markets are absorbing new construction at a faster pace, which is anticipated to drive demand for data centers. Data centers are also poised to benefit from the heightening reliance on technology in the wake of the pandemic. Data gravity is driving data center demand and its PlatformDIGITAL is poised to capitalize on this.
Particularly, Digital Realty is capitalizing on these tailwinds through its development efforts globally. During the July-September period, Digital Realty closed its proposed joint-venture deal with Brookfield Infrastructure Partners in India. Following the quarter-end, Digital Realty reached an agreement to make a strategic investment in AtlasEdge Data Centres, a leading European edge data center provider.
In recent years, the company has enhanced its presence in Europe, Australia and Asia by developing high-quality facilities. Such expansion efforts have helped Digital Realty make its business global and will drive its top and bottom lines in the years ahead.
The company is poised to benefit from its high-quality, diversified customer base, comprising tenants from the cloud, content, IT, network, other enterprise and financial industries.
Digital Realty enjoys a robust balance-sheet position. The company exited the third quarter of 2021 with cash and cash equivalents of $116 million. Its debt maturity schedule was well-laddered, with a weighted average maturity of 6.3 years and a 2.2% weighted average coupon. Further, 98% of its total debt is unsecured, offering flexibility for capital recycling. The company strategically taps the debt and equity market to bolster its balance sheet and leverage growth scopes.
Shares of Zacks Rank #3 (Hold) DLR have appreciated 9.9% in the past three months, outperforming the industry’s rise of 3%. In addition, the Zacks Consensus Estimate for its 2021 funds from operations (FFO) per share has moved up marginally to $6.53 over the past two months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research
However, Digital Realty faces stiff competition in its industry. The company competes with several data-center developers, owners and operators who enjoy the ownership of similar assets in locations as Digital Realty.
Also, there are several local developers in the United States, and several regional operators in Europe, Asia and Australia. Hence, given the solid growth potential of the data center real estate market, competition is expected to increase in the upcoming period from existing and new players. Also, there is likely to be an aggressive pricing pressure in the data-center market.
Key Picks
Some better-ranked stocks from the REIT sector include Prologis (PLD - Free Report) , Extra Space Storage Inc. (EXR - Free Report) and Rexford Industrial Realty (REXR - Free Report) .
Prologis carries a Zacks Rank of 2 (Buy) at present. Its 2021 FFO per share is expected to increase 8.4% year over year.
The Zacks Consensus Estimate for Prologis’ 2021 FFO per share has been revised marginally upward in a month.
Extra Space Storage holds a Zacks Rank of 2 at present. The 2021 FFO per share for Extra Space Storage is expected to increase 29.9% year over year.
The Zacks Consensus Estimate for EXR’s 2021 FFO per share has been revised 3.3% upward in a month.
The Zacks Consensus Estimate for Rexford Industrial’s ongoing-year FFO per share has moved 5.2% north to $1.63 over the past two months.
The Zacks Consensus Estimate for Rexford Industrial’s 2021 FFO per share suggests an increase of 23.5% year over year. Currently, REXR carries a Zacks Rank of 2.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Here's Why It's Wise to Retain Digital Realty (DLR) Stock Now
Digital Realty (DLR - Free Report) is poised to grow on accretive acquisitions and development efforts amid robust demand for data centers. A solid balance-sheet position also acts as a tailwind. However, with stiff competition in the industry, aggressive pricing pressure is a concern.
High growth in cloud computing, the Internet of Things and big data, and an elevated demand for third-party IT infrastructure are spurring demand for data-center infrastructure. Moreover, growth in artificial intelligence, autonomous vehicle and virtual/augmented reality markets is anticipated to be robust over the next five to six years.
Demand is strong in top-tier data center markets and despite enjoying high occupancy, these markets are absorbing new construction at a faster pace, which is anticipated to drive demand for data centers. Data centers are also poised to benefit from the heightening reliance on technology in the wake of the pandemic. Data gravity is driving data center demand and its PlatformDIGITAL is poised to capitalize on this.
Particularly, Digital Realty is capitalizing on these tailwinds through its development efforts globally. During the July-September period, Digital Realty closed its proposed joint-venture deal with Brookfield Infrastructure Partners in India. Following the quarter-end, Digital Realty reached an agreement to make a strategic investment in AtlasEdge Data Centres, a leading European edge data center provider.
In recent years, the company has enhanced its presence in Europe, Australia and Asia by developing high-quality facilities. Such expansion efforts have helped Digital Realty make its business global and will drive its top and bottom lines in the years ahead.
The company is poised to benefit from its high-quality, diversified customer base, comprising tenants from the cloud, content, IT, network, other enterprise and financial industries.
Digital Realty enjoys a robust balance-sheet position. The company exited the third quarter of 2021 with cash and cash equivalents of $116 million. Its debt maturity schedule was well-laddered, with a weighted average maturity of 6.3 years and a 2.2% weighted average coupon. Further, 98% of its total debt is unsecured, offering flexibility for capital recycling. The company strategically taps the debt and equity market to bolster its balance sheet and leverage growth scopes.
Shares of Zacks Rank #3 (Hold) DLR have appreciated 9.9% in the past three months, outperforming the industry’s rise of 3%. In addition, the Zacks Consensus Estimate for its 2021 funds from operations (FFO) per share has moved up marginally to $6.53 over the past two months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
However, Digital Realty faces stiff competition in its industry. The company competes with several data-center developers, owners and operators who enjoy the ownership of similar assets in locations as Digital Realty.
Also, there are several local developers in the United States, and several regional operators in Europe, Asia and Australia. Hence, given the solid growth potential of the data center real estate market, competition is expected to increase in the upcoming period from existing and new players. Also, there is likely to be an aggressive pricing pressure in the data-center market.
Key Picks
Some better-ranked stocks from the REIT sector include Prologis (PLD - Free Report) , Extra Space Storage Inc. (EXR - Free Report) and Rexford Industrial Realty (REXR - Free Report) .
Prologis carries a Zacks Rank of 2 (Buy) at present. Its 2021 FFO per share is expected to increase 8.4% year over year.
The Zacks Consensus Estimate for Prologis’ 2021 FFO per share has been revised marginally upward in a month.
Extra Space Storage holds a Zacks Rank of 2 at present. The 2021 FFO per share for Extra Space Storage is expected to increase 29.9% year over year.
The Zacks Consensus Estimate for EXR’s 2021 FFO per share has been revised 3.3% upward in a month.
The Zacks Consensus Estimate for Rexford Industrial’s ongoing-year FFO per share has moved 5.2% north to $1.63 over the past two months.
The Zacks Consensus Estimate for Rexford Industrial’s 2021 FFO per share suggests an increase of 23.5% year over year. Currently, REXR carries a Zacks Rank of 2.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.