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On Friday, Jefferies analyst Jonathan Petersen adjusted the price target on Digital Realty Trust (NYSE:DLR) shares, reducing it to $218 from the previous $226, yet maintaining a Buy rating on the stock. The $55.7 billion market cap company, which InvestingPro identifies as a prominent player in the Specialized REITs industry, currently trades at $164.81. According to InvestingPro analysis, the stock appears to be trading above its Fair Value. Petersen noted a downturn in Digital Realty Trust's new leasing activity within the hyperscale segment, which recorded approximately $23 million in deals over 1 megawatt. Despite this, the analyst pointed out that the expectations for this segment were not high. The company maintains strong fundamentals with a healthy current ratio of 1.6 and has consistently maintained dividend payments for 21 consecutive years.
Petersen found the record-setting $76 million in colocation leasing, for spaces ranging from 0 to 1 megawatt, to be of particular interest. This surge in colocation leasing is attributed to the increasing demand for artificial intelligence applications, which often require smaller deployment spaces.
Looking ahead, Digital Realty Trust's guidance for 2025 was in line with market anticipations, forecasting just over 5% growth in adjusted funds from operations (AFFO) per share. While Petersen suggested that this forecast might not be sufficient to influence the stock's performance in the immediate future, he expressed a strong belief in the company's potential for multi-year growth.
The underlying sentiment from Jefferies is one of long-term optimism for Digital Realty Trust, as the company continues to navigate the evolving landscape of digital infrastructure and data center demand, spurred on by advancements in technology such as artificial intelligence. With analyst targets ranging from $114 to $226, investors seeking deeper insights can access comprehensive analysis and additional ProTips through InvestingPro, which offers detailed financial health scores and exclusive research reports for over 1,400 US stocks.
In other recent news, Digital Realty Trust reported a successful fourth quarter, surpassing analyst expectations with adjusted funds from operations (FFO) of $1.73 per share, a leap from the anticipated $1.63. The company's revenue for the quarter was $1.44 billion, marking a 5% YoY increase. However, it fell slightly short of analyst projections of $1.46 billion.
In the recent developments, Digital Realty Trust provided a softer-than-expected 2025 revenue guidance, forecasting a range of $5.8-$5.9 billion, which was below Wall Street's consensus estimate of $6.13 billion. The company also revealed the 2025 constant-currency Core FFO per share guidance to be between $7.05 and $7.15.
Analyst firm JMP Securities maintained its Market Outperform rating on Digital Realty Trust, holding steady with a price target of $220.00. The firm's analysis underscored the company's strength in hyperscale cloud computing and AI deployments, despite a decrease in bookings from $520M in Q3 to $100M in Q4. The results, however, aligned with the firm's projections.
Analyst Greg Miller from JMP Securities noted the consistent demand for hyperscale cloud services, indicating that companies remain skeptical of alternative solutions. He also commented on the challenges of assessing a company's progress in digital infrastructure within a limited period, suggesting that short-term evaluations might not fully capture the company's advancements.
Digital Realty Trust's performance reflects the broader industry trend, where the demand for hyperscale cloud and AI solutions continues to surge. The company's consistent bookings and strategic positioning appear to reinforce its status as a key player in the market.
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