A successful portfolio manager is aware of the fact that adding well-performing stocks at the right time is of vital importance. Indicators of a stock’s bullish run include a rise in share price and strong fundamentals.
One such stock that investors need to hold onto right now is Equinix Inc. (EQIX - Free Report) . Though there are a few concerns, these are short lived, and the stock has the potential to perform well in the long run.
Equinix’s share price movement has been quite favorable. In the last one year, its shares have gained 20.2%, while the Zacks categorized REIT-Equity Trust-Retail industry recorded a decline of 8.3%.
What’s Driving Equinix?
Equinix is a global provider of network-neutral data centers and Internet exchange services for enterprises, content companies, systems integrators and network service providers. The company is on a growth trajectory, gathering momentum from its positive earnings surprise history and robust fundamentals.
It posted a positive earnings surprise in three out of the last four quarters, with an average positive surprise of 15.8%.
Last quarter, Equinix reported solid year-over-year improvement in revenues as well as earnings. The year-over-year increase in revenues was mainly driven by strong demand for cloud services from corporations, and benefits from the acquisitions of Telecity and Bit-isle businesses. Equinix witnessed revenue growth across all three geographic regions and verticals.
Acquisitions have been a major contributor to growth at Equinix. The company has made several moves for expanding its data center capacity in many of its key markets since 2003. Most recently, in Dec 2016, it entered into a definitive agreement to acquire 24 data center sites, which consist of 29 data center buildings across 15 metro areas, in operation from Verizon Communications (VZ - Free Report) , for a total cash consideration of $3.6 billion.
Expansion in important markets and consolidation of facilities in existing ones have been an important part of Equinix's core strategy. The company strives to boost its revenue base as well as profitability, by offering upgraded technology to clients. Moreover, the recurring revenue model has provided the much-needed support to the company's revenue stream over the years. The company's cloud and IT service businesses are its fastest growing segments, and account for roughly one fourth of the total revenue.
Further, Equinix remains positive on the growing demand for data centers. To meet the rising demand for cloud services, this global interconnection and data center company is expanding its IBX data centers globally, and gaining popularity among tech companies looking for data management. Thus, the company expects its total addressable market for retail data centers to increase at a CAGR of 8% from 2013 to 2017 and reach $24.0 billion. Based on this, Equinix projects revenue growth rate of 10% through 2017.
Additionally, the stock has long-term earnings per share growth rate of 16.3% and it carries a VGM Style Score of “B”.
However, intensifying competition from established Internet data center operators such as AT&T (T - Free Report) and CenturyLink Inc. (CTL - Free Report) may affect product pricing, thereby denting Equinix’s margins.
A highly-leveraged balance sheet and industry consolidation add to its woes.
Equinix has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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