BMO cuts Digital Realty Trust target to $200, keeps Outperform

On Tuesday, BMO Capital Markets adjusted its outlook on Digital Realty Trust (NYSE:DLR) shares, reducing the price target to $200 from the previous $205, while maintaining an Outperform rating on the stock. With the current share price at $166.39 and a market capitalization of $56.26 billion, InvestingPro analysis indicates the stock is trading at premium multiples. The adjustment comes amidst new market variables introduced by DeepSeek, which adds an element of uncertainty. Despite this, BMO analysts believe Digital Realty Trust is well-positioned to capitalize on a market shift towards larger capacity requirements ranging from 10 to 72MW, particularly in or near prime data center locations, which is in line with the company’s portfolio.

For the fourth quarter, it is anticipated that Digital Realty Trust may not achieve the same record-setting performance as seen in the third quarter, which posted revenues of $521 million. The company has demonstrated remarkable stability, maintaining dividend payments for 21 consecutive years with a current yield of 2.93%. Excluding interconnection revenues, BMO predicts a $130 million performance for the fourth quarter. However, the firm remains optimistic about the company’s future, citing a supportive demand environment and the potential for additional significant leasing quarters.

Looking ahead, BMO expects Digital Realty Trust’s development capital expenditures to increase by 15.5% in 2025. The company is believed to be in a strong position, with a record backlog of $859 million, which is 18.7% of annualized rent, suggesting a de-risked growth outlook. InvestingPro data confirms this strength, showing liquid assets exceeding short-term obligations and trailing twelve-month revenue of $5.37 billion. For deeper insights into Digital Realty Trust’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro. The improving balance sheet, robust pricing power, and the potential for increased mark-to-market on leases larger than 1MW, which BMO estimates at around 30%, are projected to drive Core Funds From Operations (FFO) growth at a rate of 2%, 6%, and 9% for the years 2024, 2025, and 2026, respectively.

For the fourth quarter, BMO’s forecast for Core FFO per share stands at $1.73, which is slightly above the consensus estimate of $1.72. Additionally, for the year 2025, BMO’s estimate of $7.12 for Core FFO exceeds the consensus forecast of $7.08. Analyst targets range from $114 to $226 per share, reflecting diverse market views. However, the firm notes that a weaker Euro could present an approximate 80 basis points headwind to the 2025 FFO.

In other recent news, Digital Realty Trust has been the focus of several significant developments. JMP Securities has reiterated its Market Outperform rating and a $220.00 price target for the company, emphasizing the firm’s solid performance and potential growth in revenue and Adjusted Funds From Operations (AFFO). Deutsche Bank (ETR:DBKGn) also upgraded Digital Realty from Hold to Buy, raising the price target to $194. This upgrade was driven by the company’s strong demand across various sectors and a robust pipeline of over $1 billion in bookings over the last twelve months.

In addition to these analyst updates, Digital Realty has made substantial financial moves by issuing €850 million in senior unsecured notes through its finance subsidiary, Digital Dutch Finco B.V. The net proceeds from the offering, approximately €838.4 million, are intended for a range of uses including repaying borrowings, acquiring properties, and funding development opportunities.

These recent developments highlight the ongoing momentum and financial strength of Digital Realty. The company’s strategic moves and positive analyst ratings underscore its position in the industry and potential for continued growth.

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