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On Tuesday, BMO Capital Markets adjusted its outlook on Equinix stock (NASDAQ:EQIX), reducing the price target from $1,065 to $1,045, while keeping a Market Perform rating on the shares. The firm’s analyst, Ari Klein, highlighted Equinix as their top data center (DC) pick and noted the current market position as an attractive entry point for investors, expressing confidence in the company’s long-term high single-digit adjusted funds from operations (AFFO) growth. Trading at $843.95, with a market capitalization of $82.05 billion, Equinix demonstrates solid financial health with an overall score of "GOOD" according to InvestingPro metrics.
Klein acknowledged the defensive nature of tower companies and the potential underestimation of mid-single-digit normalized organic revenue growth within the sector. However, he pointed out that near-term AFFO growth is subdued and that the sector generally lacks significant catalysts that could drive growth. The company has maintained steady performance with 6.59% revenue growth in the last twelve months and a healthy dividend yield of 2.19%, supported by 10.09% dividend growth.
The analyst expressed a desire for improved carrier activity, which could lead to better leasing results, as a precondition for a more positive stance on the sector. According to Klein, this improvement in carrier activity is necessary before they could become more constructive in their outlook.
The reduction in Equinix’s price target comes amid a broader assessment of the sector, where BMO Capital Markets is looking for signs of stronger leasing activity driven by carriers to bolster confidence in growth prospects. As it stands, the firm maintains a neutral stance on Equinix, awaiting further developments that could potentially enhance the company’s growth trajectory.
In other recent news, Equinix reported its financial results for the fourth quarter of 2024, revealing a 7% increase in global revenues year-over-year, reaching $2.261 billion. The company’s full-year revenue for 2024 was $8.7 billion, marking an 8% rise from the previous year. Equinix also posted an adjusted EBITDA of $1.021 billion for Q4, representing 45% of revenues, and anticipates 7-8% revenue growth for 2025 on a normalized and constant currency basis. Analysts from TD Cowen, BMO Capital Markets, and Jefferies have recently adjusted their price targets for Equinix, with TD Cowen setting it at $978, BMO at $1,065, and Jefferies at $1,140, while maintaining positive ratings on the stock. The revised targets follow Equinix’s Q4 results, which fell short of expectations, partly due to foreign exchange fluctuations and capacity constraints. Despite these challenges, Equinix is seeing increased demand for artificial intelligence workloads, with significant bookings related to AI capabilities. The company expects a 9-12% growth in Adjusted Funds From Operations (AFFO) for 2025, driven by robust demand and strategic positioning in AI and high-performance computing.
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