Equinix stock downgraded to Market Perform by Raymond James

Investing.com - Raymond (NSE:RYMD) James downgraded Equinix (NASDAQ:EQIX) from Outperform to Market Perform on Thursday, citing concerns about the data center company’s multi-year business transformation. The stock, currently trading at $824.31, has declined 12% over the past six months, though InvestingPro data shows the company maintains a "GOOD" overall financial health score.

The downgrade comes as Equinix pursues an ambitious plan to double its capacity and position itself to capture AI-related demand, a strategy that Raymond James believes will create short-term challenges despite potential long-term benefits. With a market capitalization of $81 billion and revenue growth of 5.8% in the last twelve months, the company appears overvalued according to InvestingPro’s Fair Value analysis.

Raymond James highlighted several immediate concerns, including muted short-term growth rates and a significant increase in capital expenditure outlook over the next few years as the company works to expand its capacity.

The firm noted that Equinix is implementing organizational changes to streamline costs and improve customer interactions, which should ultimately yield positive results but could create disruption during the transition period.

Raymond James emphasized that while these strategic shifts are likely beneficial for Equinix’s long-term prospects, "this amount of change in a short period of time never comes without challenges."

In other recent news, Equinix Inc. reported a strong performance for the first quarter of 2025, with revenues reaching $2.2 billion, marking an 8% increase year-over-year. The company’s adjusted EBITDA was $1.1 billion, representing 48% of revenues, and it raised its full-year guidance for revenues, adjusted EBITDA, and AFFO. Equinix also issued €1.5 billion in senior notes to finance green projects, with maturities set for 2029 and 2034. Analyst firms have shown confidence in Equinix’s future prospects; Stifel reiterated a Buy rating with a $1,050 price target, while JMP Securities maintained a Market Outperform rating, setting a $1,200 price target. Citi analysts also raised their price target for Equinix from $970 to $990, citing the company’s robust first-quarter financial performance and increased 2025 guidance. Equinix’s management highlighted strong demand for AI-related services, with half of the top deals in Q1 involving AI, and expressed optimism about improving margins and revenue growth. The company remains focused on expanding its digital infrastructure capabilities, particularly in AI and high-performance computing sectors, while managing increased churn in the EMEA region.

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