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On Friday, JPMorgan analyst Richard Choe updated the investment firm's outlook on Digital Realty Trust (NYSE:DLR), increasing the price target from $185.00 to $190.00. The Overweight rating on the company's stock remains unchanged. With analyst targets ranging from $113 to $220, and the stock currently trading at $161.25, InvestingPro analysis indicates the stock is currently overvalued relative to its Fair Value. Choe's adjustment follows Digital Realty's release of its fourth-quarter 2024 earnings and the 2025 fiscal year guidance.
Digital Realty, a real estate investment trust specializing in data center solutions and a prominent player in the Specialized REITs industry, reported lower-than-expected earnings for the fourth quarter of 2024. The company, which has maintained dividend payments for 21 consecutive years and currently offers a 2.96% yield, saw its forecast for 2025 received positively. According to Choe, colocation and interconnection bookings remained strong, totaling $76 million. However, the company saw a decrease in large-scale deals, with signings for transactions over 1 megawatt dropping to $22.6 million. This decline was anticipated after a robust third quarter in 2024, which saw bookings surpass $500 million due to significant contracts.
Looking ahead, Digital Realty has provided guidance for the year 2025 that suggests continued growth. The company, with its current market capitalization of $54.51 billion, expects its revenue to be in the range of $5.8 to $5.9 billion, indicating a year-over-year increase of 4-6%. Adjusted EBITDA is projected to reach between $3.1 and $3.2 billion, which would represent a 5-9% rise from the previous year. Moreover, core Funds From Operations (FFOPS) is estimated to be in the region of $7.00 to $7.10 per share, approximately a 5% increase, or $7.05 to $7.15 on a constant currency basis. InvestingPro subscribers can access 8 additional key insights and a comprehensive Pro Research Report that provides deep-dive analysis of Digital Realty's financial health and growth prospects.
Digital Realty's guidance points to a steady performance in the upcoming year, with the company's strategic focus on colocation and interconnection services contributing to its optimistic outlook. The revised price target from JPMorgan reflects confidence in Digital Realty's ability to navigate the market and continue its growth trajectory, supported by its strong gross profit margin of 53.29% and healthy current ratio of 1.91.
In other recent news, Digital Realty Trust has been in the spotlight due to various developments. Jefferies analyst Jonathan Petersen recently reduced the price target on the company to $218 from $226, while maintaining a Buy rating. This adjustment is in response to a downturn in the company's new leasing activity, particularly within the hyperscale segment. However, Petersen highlighted a record-setting $76 million in colocation leasing, attributed to the increasing demand for artificial intelligence applications.
On the other hand, JMP Securities reiterated its Market Outperform rating on Digital Realty Trust, maintaining a steady price target of $220. The firm's analysis emphasized the company's strength in hyperscale cloud computing and AI deployments, despite a quarter-on-quarter decrease in bookings. The consistent demand for hyperscale cloud services was noted as a positive aspect of the company's performance.
Despite beating fourth-quarter earnings expectations, Digital Realty Trust provided a softer-than-expected 2025 revenue guidance, which led to a slight dip in shares. The company reported fourth-quarter adjusted funds from operations (FFO) of $1.73 per share, surpassing the consensus estimate of $1.63. However, the revenue guidance for 2025 falls below Wall Street's consensus estimate. These are recent developments that investors may want to consider.
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