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Here's Why You Should Retain Digital Realty (DLR) Stock Now
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Amid robust demand for data centers, Digital Realty (DLR - Free Report) is well-poised to grow through its accretive acquisitions and development efforts. A solid balance-sheet position also augurs well. 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 the elevated demand for third-party IT infrastructure are spurring demand for data center infrastructure. Moreover, growth in the AI, 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 fast absorbing new construction, which is anticipated to drive demand for data centers. Moreover, data centers are poised to benefit from the excessive reliance on technology and acceleration in digital transformation strategies by enterprises.
Capitalizing on such factors, Digital Realty is expanding its portfolio through accretive acquisitions. During the October-December period, DLR made a strategic investment in AtlasEdge Data Centres, a European edge data center provider. It also acquired 16 acres of land in Northern Virginia for roughly $23 million. In January 2022, Digital Realty announced its agreement to acquire a majority stake in the African carrier-neutral data center and interconnection services provider, Teraco Data Environments, for $3.5 billion. In recent years, the company has enhanced its presence in Europe, Australia and Asia through the development of high-quality facilities. Such expansion efforts have helped Digital Realty make its business global and will drive the company’s top and bottom lines in the years ahead.
Digital Realty enjoys a robust balance-sheet position. DLR exited 2021 with cash and cash equivalents of $142.7 million, up from $116 million recorded at the end of the third quarter of 2021. Its debt maturity schedule was well-laddered, with a weighted average maturity of 6.4 years and a 2.1% weighted average coupon. Digital Realty strategically taps the debt and equity market to bolster its balance sheet and leverage growth scopes.
In March, Digital Realty announced that its board of directors authorized a quarterly cash dividend payment of $1.22 per share, representing a sequential hike of 5.2% from the prior dividend of $1.16.
Shares of this Zacks Rank #3 (Hold) player have declined 2.5% in the past six months against the industry’s rally of 8.7%. In addition, the estimate revision trend for its 2022 funds from operations (FFO) per share does not indicate a favorable outlook for the company as the consensus estimate has remained unrevised over the past month. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research
Digital Realty faces stiff competition in its industry. DLR competes with several data center developers, owners and operators who enjoy the ownership of similar assets in locations.
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, the competition is expected to increase in the upcoming period from the existing and new players. Also, there is likely to be aggressive pricing pressure in the data center market.
Prologis holds a Zacks Rank of 2 (Buy) at present. Prologis’ 2022 revenues are expected to increase 8.7% year over year.
The Zacks Consensus Estimate for PLD’s 2022 FFO per share has been revised 3.3% upward in the past two months to $5.07.
The Zacks Consensus Estimate for Public Storage’s 2022 FFO per share has moved marginally north to $15.42 over the past week.
Currently, Public Storage carries a Zacks Rank of 2. PSA's long-term growth rate is projected at 6.1%.
The Zacks Consensus Estimate for Extra Space Storage’s 2022 FFO per share has moved marginally north to $7.85 over the past week.
Extra Space Storage's 2022 revenues are expected to increase 15.2% year over year. Currently, EXR 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.
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Here's Why You Should Retain Digital Realty (DLR) Stock Now
Amid robust demand for data centers, Digital Realty (DLR - Free Report) is well-poised to grow through its accretive acquisitions and development efforts. A solid balance-sheet position also augurs well. 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 the elevated demand for third-party IT infrastructure are spurring demand for data center infrastructure. Moreover, growth in the AI, 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 fast absorbing new construction, which is anticipated to drive demand for data centers. Moreover, data centers are poised to benefit from the excessive reliance on technology and acceleration in digital transformation strategies by enterprises.
Capitalizing on such factors, Digital Realty is expanding its portfolio through accretive acquisitions. During the October-December period, DLR made a strategic investment in AtlasEdge Data Centres, a European edge data center provider. It also acquired 16 acres of land in Northern Virginia for roughly $23 million. In January 2022, Digital Realty announced its agreement to acquire a majority stake in the African carrier-neutral data center and interconnection services provider, Teraco Data Environments, for $3.5 billion. In recent years, the company has enhanced its presence in Europe, Australia and Asia through the development of high-quality facilities. Such expansion efforts have helped Digital Realty make its business global and will drive the company’s top and bottom lines in the years ahead.
Digital Realty enjoys a robust balance-sheet position. DLR exited 2021 with cash and cash equivalents of $142.7 million, up from $116 million recorded at the end of the third quarter of 2021. Its debt maturity schedule was well-laddered, with a weighted average maturity of 6.4 years and a 2.1% weighted average coupon. Digital Realty strategically taps the debt and equity market to bolster its balance sheet and leverage growth scopes.
In March, Digital Realty announced that its board of directors authorized a quarterly cash dividend payment of $1.22 per share, representing a sequential hike of 5.2% from the prior dividend of $1.16.
Shares of this Zacks Rank #3 (Hold) player have declined 2.5% in the past six months against the industry’s rally of 8.7%. In addition, the estimate revision trend for its 2022 funds from operations (FFO) per share does not indicate a favorable outlook for the company as the consensus estimate has remained unrevised over the past month. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research
Digital Realty faces stiff competition in its industry. DLR competes with several data center developers, owners and operators who enjoy the ownership of similar assets in locations.
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, the competition is expected to increase in the upcoming period from the existing and new players. Also, there is likely to be aggressive pricing pressure in the data center market.
Stocks to Consider
Some key picks from the REIT sector include Prologis, Inc. (PLD - Free Report) , Public Storage (PSA - Free Report) and Extra Space Storage Inc. (EXR - Free Report) .
Prologis holds a Zacks Rank of 2 (Buy) at present. Prologis’ 2022 revenues are expected to increase 8.7% year over year.
The Zacks Consensus Estimate for PLD’s 2022 FFO per share has been revised 3.3% upward in the past two months to $5.07.
The Zacks Consensus Estimate for Public Storage’s 2022 FFO per share has moved marginally north to $15.42 over the past week.
Currently, Public Storage carries a Zacks Rank of 2. PSA's long-term growth rate is projected at 6.1%.
The Zacks Consensus Estimate for Extra Space Storage’s 2022 FFO per share has moved marginally north to $7.85 over the past week.
Extra Space Storage's 2022 revenues are expected to increase 15.2% year over year. Currently, EXR 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.