Equinix price target lowered to $965 at Scotiabank on higher AI capex

Investing.com - Scotiabank (TSX:BNS) lowered its price target on Equinix (NASDAQ:EQIX) to $965 from $1,030 on Thursday while maintaining a Sector Outperform rating, following the company’s analyst day. The stock, currently trading at $824.31, fell significantly from its previous close of $906.50.

The data center operator, currently valued at $81 billion, held its analyst day on Wednesday, where it emphasized underlying growth opportunities from artificial intelligence and its plans to increase digital infrastructure investments to capture future upside. According to InvestingPro data, analysts maintain a bullish consensus on Equinix, with price targets ranging from $837 to $1,200.

The price target reduction reflects Scotiabank’s response to Equinix’s announcement of larger-than-expected capital expenditures in the coming years, along with the need to raise capital to fund these investments.

These funding requirements will pressure short-term AFFO/share growth, reducing it to 5% from the previously expected 7%, according to Scotiabank’s analysis, which prompted the firm to reduce its valuation multiples by 1.5x.

Equinix stock fell $82 on Wednesday, which Scotiabank attributed to the gap between the company’s short-term outlook and previous market expectations, though the firm maintains its positive long-term view on Equinix’s business model and ability to create value through digital infrastructure investments as AI adoption continues.

In other recent news, Equinix has been making headlines with significant developments. The company announced plans to increase its capital expenditures to $4-5 billion annually through 2029, aiming to enhance its facilities to accommodate growing enterprise AI workloads. This strategic move has led Jefferies to lower its price target for Equinix from $990 to $940, while still maintaining a Buy rating, reflecting confidence in the long-term strategy despite potential near-term financial pressures. Equinix’s recent Analyst Day revealed a reduced growth forecast for adjusted funds from operations (AFFO) per share to 5-9% for 2025-2029, down from the previous 7-10%, due to higher interest rates and increased capital expenditures.

Despite these adjustments, Evercore ISI and Goldman Sachs have maintained their positive outlooks on Equinix, with price targets of $1,035 and $1,020, respectively. However, BMO Capital has downgraded Equinix from Outperform to Market Perform, citing a subdued growth outlook and few near-term catalysts, though it acknowledges potential for accelerated growth beyond 2030. Meanwhile, Citizens JMP continues to rate Equinix as Market Outperform with a $1,200 price target, highlighting the company’s potential moves into the wholesale/hyperscale business segment. These recent developments underscore Equinix’s strategic focus on expanding its capabilities in response to the increasing demand for digital services and AI applications.

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