On Tuesday, CFRA updated its assessment of Equinix (NASDAQ:EQIX), a leading global data center Real Estate Investment Trust (REIT), by increasing the price target to $985 from the previous $975. The firm maintained a Hold rating on the stock despite the target adjustment.
Currently trading at $963.98, InvestingPro analysis indicates the stock is overvalued, with a P/E ratio of 86.59. The revision reflects a high-risk premium with a forward Price/Funds From Operations (P/FFO) multiple of 36.5 times, which is notably higher than that of Equinix's direct peers.
The analyst at CFRA made a correction to their Funds From Operations (FFO) estimate for 2024, reducing it by $1.75 to $24.70, transitioning from GAAP FFO to a normalized FFO. However, the FFO forecast for 2025 remains unchanged at $27.00, which is already considered normalized.
With a market capitalization of $93.12 billion and an overall Financial Health score rated as GOOD by InvestingPro, Equinix has been identified as a beneficiary of artificial intelligence (AI) advancements, and its valuation premium relative to other REIT property types highlights the significant global opportunities in offering and developing data centers.
Equinix's financial performance in the third quarter of 2024 showcased a diverse geographic revenue mix with the Americas contributing a 5% increase (accounting for 44% of total revenue), the EMEA region also up by 5% (34%), and the Asia-Pacific region growing by 14% (22%). The company generated total revenue of $8.15 billion in the last twelve months, with a steady revenue growth of 4.5%.
The company's capital expenditures were on target, with a $724 million outlay in the third quarter, focusing on major projects across eight markets, and 85% of the capital expenditure was linked to long-term ground leases.
CFRA's report also commended Equinix for its robust customer base, which includes over 3,000 cloud and IT service providers. The top 50 customers alone constituted 37% of the monthly recurring revenues, reflecting a strong and stable income stream that supports its 1.77% dividend yield.
The analyst highlighted the high barriers to entry in the industry, the potential for growth through site expansion, and the visibility of earnings due to the recurring nature of the revenue base. For deeper insights into Equinix's financial health and growth prospects, InvestingPro subscribers can access the comprehensive Pro Research Report, featuring expert analysis and advanced metrics.
In other recent news, Equinix has been the subject of multiple analyst upgrades, with Truist Securities raising the company's stock price target to $1,090 and CFRA increasing it to $975, both firms maintaining their respective Buy and Hold ratings. These revisions follow Equinix's impressive third-quarter earnings for 2024, which prompted analysts to adjust the company's EBITDA and AFFO projections for the coming years. Truist Securities' updated estimates now set the 2024 expected EBITDA at $4,115 million, a significant increase from the current EBITDA of $3.1 billion.
Equinix also recently announced the issuance of €1.15 billion in senior notes, set to finance or refinance green projects. Additionally, the company entered a strategic partnership with CPP Investment Board and GIC to invest over $15 billion in xScale facilities. This move is expected to cater to the increasing demand for digital infrastructure and AI workloads.
In the company's third-quarter earnings call, Equinix reported a 7% year-over-year increase in revenue to $2.2 billion and a 12% rise in adjusted EBITDA, marking the 87th consecutive quarter of revenue growth. CFRA's maintained Hold rating on the stock comes with an increase in the 2025 funds from operations (FFO) estimate to $27.00. Revenue expectations stand at $8.8 billion for 2024 and $9.5 billion for 2025.
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