Technology

Top Analyst Raises Targets on Red-Hot Data Center Stocks

Equinix

This is one of the largest companies in the industry. Equinix Inc. (NASDAQ: EQIX) provides data center services to protect and connect the information assets for the enterprises, financial services companies, and content and network providers primarily in the Americas, Europe, the Middle East, Africa and the Asia-Pacific.


The company provides colocation services and related offerings, including operations space, storage space, cabinets and power for customers colocation needs; interconnection services, comprising physical cross connect/direct interconnections, Equinix Internet Exchange, Equinix Cloud Exchange, Equinix Metro Connect and Internet connectivity services; and managed IT infrastructure services, including installation of customer equipment and cabling, as well as equipment rebooting and power cycling, card swapping and emergency equipment replacement services.

The analysts said this:

As the global leader in colocation and interconnection services and a best-of-breed operator in the carrier-neutral colocation space, Equinix sits at the epicenter of most of the world’s internet traffic and is exposed to strong secular tailwinds involving hybrid IT and digital content. While recent M&A has created a drag on results, we look to the strategic value from assets added to the Equinix platform to drive revenue synergies and long-term growth. As such, we view the stocks as a core holding for both Tech-focused and Real Estate investment portfolios as its business model captures a desirable mix of growth and stable recurring cash flows, which should drive a mid-to-high teen dividend compounded-annual-growth-rate for years to come.

Investors receive a 1.41% distribution. The $735 Stifel target price was raised to $795, while the consensus target is $752.95. Equinix stock closed at $752.53 per share.

QTS Realty Trust

This is the other top pick data center at Stifel, and some feel that the company could be a takeover target. QTS Realty Trust Inc. (NYSE: QTS) is a leading provider of secure, compliant data center solutions, hybrid cloud and fully managed services. Its integrated technology service platform of custom data center colocation and cloud and managed services provide flexible, scalable, secure IT solutions for web and IT applications.

Its Critical Facilities Management provides increased efficiency and greater performance for third-party data center owners and operators. QTS owns, operates or manages 24 data centers and supports more than 1,000 customers in North America, Europe and the Asia Pacific.

As the other top pick, Stifel remains very positive on its potential:

We have become increasingly positive on the company’s recent restructuring plan centered around a narrowing of its C3 Business and a clearer focus on Hyperscale and Hybrid Colocation. While this change has caused some to question management and its strategy (which can be appreciated), we believe that it only enhances our thesis that as the world gradually shifts to a hybrid IT model, enterprises require support from a trusted provider like QTS to navigate the uncertain transition to a hybrid model where flexibility, security and compliance concerns remain high. We view its Service Delivery Platform (SDP) as a key differentiation in driving its overall strategy of providing customers with integrated hybrid solutions with enhanced visibility and control of their IT environments, which further enhances QTS’ value proposition.

Investors receive a 2.75% distribution. Stifel raised the $72 price target is to $74. The consensus target is $71.67, and QTS Realty Trust stock closed most recently at $69.23.


These are all very solid total return plays in an industry that shows very little sign of slowing. They have rallied this year, and with second-quarter earnings due soon, it may make sense to buy partial positions and see how the results come in.