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5 Reasons That Make Equinix (EQIX) Stock a Solid Portfolio Pick
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In a world where digital transformation is paramount, Equinix (EQIX - Free Report) continues to prove itself as a pivotal player in the global digital infrastructure landscape.
EQIX recently announced an expanded partnership with Southern Cross Cables Limited to serve as a vital U.S.-based interconnectivity access point for the Southern Cross NEXT (“SX NEXT”) submarine cable system. This development is set to redefine digital connectivity among Australia, New Zealand and the United States while addressing the growing demand for low-latency, high-capacity subsea cables.
Moreover, in a strategic move to capitalize on India's burgeoning digital economy, in August, Equinix announced a $42 million investment to establish its fourth International Business Exchanges (“IBX”) data center in Mumbai. This new facility, aptly named MB4, is poised to address the escalating demand for cutting-edge data centers and interconnection services while supporting local and overseas businesses in their digital transformation endeavors.
Analysts also seem bullish on this Zacks Rank #1 (Strong Buy) stock. The estimate revision trend for 2023 funds from operations (FFO) per share indicates a favorable outlook for the company as it has increased 11.3% upward over the past month to $31.93.
Year to date, against the real estate market’s fall of 11.2%, shares of Equinix have risen 9.2%. Given its strong fundamentals and positive estimate revisions, the stock is likely to keep performing well in the quarters ahead.
Image Source: Zacks Investment Research
What Makes Equinix a Solid Pick?
Solid Market Fundamentals: The need for data center infrastructure has stayed strong due to the expansion of cloud computing, the Internet of Things and Big Data. Additionally, there is increased demand for third-party IT infrastructure. Furthermore, the rise of AI, autonomous vehicles and virtual/augmented reality markets has established a sturdy foundation for data centers.
Amid this, Equinix’s geographically diverse portfolio of IBX data centers is expected to benefit from enterprises’ increasing dependence on technology and the expedited implementation of digital transformation strategies.
Portfolio Strength: Equinix has been achieving continued business momentum with its critical mass of customers and the resultant “network effect” within its IBX centers. Direct interconnection with its networks, connecting the majority of the world’s Internet routes, enables customers to increase the efficiency of their IT infrastructure, remove complexities associated with infrastructure administration and management and reduce costs. Further, the benefits provided by the Platform Equinix have led to a loyal and blue-chip customer base.
With an impressive footprint of 250 IBX and xScale data centers in 71 global markets across 32 countries, Equinix is well-poised to benefit from the high demand for inter-connected data center space amid rising enterprise cloud adoption and customers’ digital demand. For 2023, we estimate year-over-year growth of 12.8% in its total revenues.
Expansion Efforts: EQIX has been focusing on the expansion of data center capacity in key markets and strengthening its competitive positioning and global reach. In the second quarter of 2023, Equinix added 12 new projects, including new IBX data center builds in Lisbon, Monterrey and Mumbai.
Moreover, Equinix has an encouraging development pipeline, which bodes well for its long-term growth. As of the end of the second quarter of 2023, it had 53 major projects in progress across 40 metros in 24 countries, including 11 xScale builds that are expected to deliver around 90 megawatts of capacity once opened.
Balance Sheet Strength: Encouragingly, Equinix’s robust balance sheet position enables it to capitalize on long-term growth opportunities. It had $6.5 billion of available liquidity as of Jun 30, 2023. Its net leverage ratio was 3.6, and the weighted average maturity was 8.1 years as of Jun 30, 2023. Moreover, it enjoyed investment-grade credit ratings of Baa2 from Moody’s, BBB rating from S&P Global Ratings and BBB+ from Fitch Ratings as of the end of the second quarter of 2023, rendering it favorable access to the debt market.
Dividend: Solid dividend payouts are arguably the biggest enticements for REIT investors, and Equinix has remained committed to that. EQIX has increased its dividend five times in the last five years, and its five-year annualized dividend growth rate is 8.36%. Given a robust operating platform, healthy financial position, our year-over-year growth projection of 10.3% for 2023 adjusted FFO (AFFO) and a lower dividend payout (compared to its industry), its dividend distribution is expected to be sustainable in the long run.
The Zacks Consensus Estimate for Welltower’s 2023 FFO per share has been raised marginally over the past month to $3.55.
The Zacks Consensus Estimate for Americold Realty Trust’s ongoing year’s FFO per share has been raised marginally over the past month to $1.26.
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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5 Reasons That Make Equinix (EQIX) Stock a Solid Portfolio Pick
In a world where digital transformation is paramount, Equinix (EQIX - Free Report) continues to prove itself as a pivotal player in the global digital infrastructure landscape.
EQIX recently announced an expanded partnership with Southern Cross Cables Limited to serve as a vital U.S.-based interconnectivity access point for the Southern Cross NEXT (“SX NEXT”) submarine cable system. This development is set to redefine digital connectivity among Australia, New Zealand and the United States while addressing the growing demand for low-latency, high-capacity subsea cables.
Moreover, in a strategic move to capitalize on India's burgeoning digital economy, in August, Equinix announced a $42 million investment to establish its fourth International Business Exchanges (“IBX”) data center in Mumbai. This new facility, aptly named MB4, is poised to address the escalating demand for cutting-edge data centers and interconnection services while supporting local and overseas businesses in their digital transformation endeavors.
Analysts also seem bullish on this Zacks Rank #1 (Strong Buy) stock. The estimate revision trend for 2023 funds from operations (FFO) per share indicates a favorable outlook for the company as it has increased 11.3% upward over the past month to $31.93.
Year to date, against the real estate market’s fall of 11.2%, shares of Equinix have risen 9.2%. Given its strong fundamentals and positive estimate revisions, the stock is likely to keep performing well in the quarters ahead.
Image Source: Zacks Investment Research
What Makes Equinix a Solid Pick?
Solid Market Fundamentals: The need for data center infrastructure has stayed strong due to the expansion of cloud computing, the Internet of Things and Big Data. Additionally, there is increased demand for third-party IT infrastructure. Furthermore, the rise of AI, autonomous vehicles and virtual/augmented reality markets has established a sturdy foundation for data centers.
Amid this, Equinix’s geographically diverse portfolio of IBX data centers is expected to benefit from enterprises’ increasing dependence on technology and the expedited implementation of digital transformation strategies.
Portfolio Strength: Equinix has been achieving continued business momentum with its critical mass of customers and the resultant “network effect” within its IBX centers. Direct interconnection with its networks, connecting the majority of the world’s Internet routes, enables customers to increase the efficiency of their IT infrastructure, remove complexities associated with infrastructure administration and management and reduce costs. Further, the benefits provided by the Platform Equinix have led to a loyal and blue-chip customer base.
With an impressive footprint of 250 IBX and xScale data centers in 71 global markets across 32 countries, Equinix is well-poised to benefit from the high demand for inter-connected data center space amid rising enterprise cloud adoption and customers’ digital demand. For 2023, we estimate year-over-year growth of 12.8% in its total revenues.
Expansion Efforts: EQIX has been focusing on the expansion of data center capacity in key markets and strengthening its competitive positioning and global reach. In the second quarter of 2023, Equinix added 12 new projects, including new IBX data center builds in Lisbon, Monterrey and Mumbai.
Moreover, Equinix has an encouraging development pipeline, which bodes well for its long-term growth. As of the end of the second quarter of 2023, it had 53 major projects in progress across 40 metros in 24 countries, including 11 xScale builds that are expected to deliver around 90 megawatts of capacity once opened.
Balance Sheet Strength: Encouragingly, Equinix’s robust balance sheet position enables it to capitalize on long-term growth opportunities. It had $6.5 billion of available liquidity as of Jun 30, 2023. Its net leverage ratio was 3.6, and the weighted average maturity was 8.1 years as of Jun 30, 2023. Moreover, it enjoyed investment-grade credit ratings of Baa2 from Moody’s, BBB rating from S&P Global Ratings and BBB+ from Fitch Ratings as of the end of the second quarter of 2023, rendering it favorable access to the debt market.
Dividend: Solid dividend payouts are arguably the biggest enticements for REIT investors, and Equinix has remained committed to that. EQIX has increased its dividend five times in the last five years, and its five-year annualized dividend growth rate is 8.36%. Given a robust operating platform, healthy financial position, our year-over-year growth projection of 10.3% for 2023 adjusted FFO (AFFO) and a lower dividend payout (compared to its industry), its dividend distribution is expected to be sustainable in the long run.
Other Stocks to Consider
Some other top-ranked stocks from the REIT sector are Welltower (WELL - Free Report) and Americold Realty Trust (COLD - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Welltower’s 2023 FFO per share has been raised marginally over the past month to $3.55.
The Zacks Consensus Estimate for Americold Realty Trust’s ongoing year’s FFO per share has been raised marginally over the past month to $1.26.
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.