The top data center pick at Goldman Sachs is one of the larger companies in the arena. 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 cited these four top reasons to own the shares of the industry powerhouse:
1) Enterprises’ acceleration of their digital transformation plans should provide a long-term revenue tailwind for the company.
2) We have high visibility into the company’s long-term revenue, EBITDA and AFFO/share growth following the company’s analyst day and believe that there is limited downside risk to consensus estimates.
3) We estimate that Equinix could generate >$10bn of excess liquidity that could fund M&A, strategic investments or capital returns over the next 6 years, which suggests upside potential to our AFFO/share estimates.
4) The company’s sector high AFFO/share growth (Goldman Sachs estimates 3-year compounded annual growth rate of 9% vs. 8% for the median data center peer) could drive further upside to EQIX’s premium valuation (28.9x Next 12 months/Adjusted funds from operations vs. 24.4x for the average data center).
Investors receive a 1.39% distribution. Goldman Sachs has a towering $910 target price, while the posted consensus target is $866.29. Equinix stock closed at $823.04 a share on Tuesday.