Morgan Stanley initiates coverage on Digital Realty Trust stock with Equalweight rating

Investing.com - Morgan Stanley initiated coverage on Digital Realty Trust (NYSE:DLR), a prominent player in the Specialized REITs industry with a $61 billion market cap, with an Equalweight rating and a $195.00 price target on Thursday. According to InvestingPro data, the company maintains strong financial health with a "GOOD" overall score.

The investment bank’s price target suggests an 11% upside potential to the data center real estate investment trust’s current share price, based on year-end 2026 projections.

Morgan Stanley noted that while Digital Realty is positioned for nearly double-digit revenue growth and AFFO (adjusted funds from operations) per share growth, these positive factors are largely reflected in current market expectations.

The firm’s estimates fall modestly below consensus due to "lower visibility into commencement timing" of projects, and it sees a balanced risk-reward profile with a "~1x bull/bear skew."

Morgan Stanley highlighted Digital Realty’s greater exposure to the wholesale market compared to competitor Equinix, noting this segment features longer lease times, lower pricing on a dollar per kilowatt basis, and higher customer concentration, with potential long-term risk if a "flat or deflationary pricing environment returns" allowing hyperscale tenants to exert leverage over data center operators.

In other recent news, Digital Realty announced a strategic collaboration with Dell Technologies and DXC Technology to enhance enterprise AI infrastructure. This partnership integrates Digital Realty’s PlatformDIGITAL with Dell’s AI Factory technology and DXC’s services to streamline AI deployment for businesses. Additionally, Digital Realty Trust’s board approved the 2025 Carried Interest Plan, which offers carried interest and appreciation interest awards to select employees, aiming to attract and retain talent linked to strategic capital ventures.

BMO Capital has reiterated an Outperform rating for Digital Realty Trust, maintaining a $195 price target, citing a positive outlook for AI despite recent pressures on data center stocks. Citizens JMP also maintained a Market Outperform rating, with a $220 price target, and adjusted its 2025 and 2026 AFFO per share estimates slightly upwards. These adjustments reflect strong second-quarter performance, ongoing leasing momentum, and pricing power. These developments highlight the company’s strategic moves and analyst confidence in its future performance.

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