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On Monday, UBS analyst Kevin McVeigh maintained a Sell rating on Iron Mountain (NYSE:IRM) shares, with a steady price target of $45.00. According to InvestingPro data, analyst targets for IRM range from $45 to $140, with the stock currently trading at $87.03. The company maintains a 3.63% dividend yield, having consistently paid dividends for 16 consecutive years. McVeigh noted that despite Iron Mountain’s data center revenue accounting for approximately 10% of its total revenue, the company’s stock had previously enjoyed a surge in market optimism driven by artificial intelligence, which added roughly $20 billion in incremental equity value. This surge peaked in October 2024, when the company’s market capitalization reached $32 billion. Current market capitalization stands at $25.54 billion, with the stock trading at a notably high P/E ratio of 140.4x. Want deeper insights? InvestingPro offers comprehensive valuation metrics and 12 additional expert tips for IRM.
McVeigh expressed concerns that the stock’s high valuation in the fall might have been overestimating a significant change in revenue growth, which did not align with the reality of the company’s largely capital-intensive operations that make up the other 90% of its revenue. He also pointed out that Iron Mountain’s efforts to grow its data center business, projected to represent about 10% of fiscal year 2024 revenue, and to pivot towards asset lifecycle management, expected to account for around 8%, might require raising additional capital.
Since reaching its peak in October, Iron Mountain’s stock has seen a correction of approximately 30%, shedding around $12.5 billion in equity value. This decline reflects the market’s adjustment to expectations of slowing revenue growth and a forecast of continued cash outflows. Despite these challenges, the company has maintained 12.22% revenue growth over the last twelve months. Additionally, concerns over DOGE, which relates to pricing resiliency in storage—accounting for 75% of Iron Mountain’s total revenue—have also contributed to the stock’s downturn. For a complete analysis of IRM’s financial health and growth prospects, access the detailed Pro Research Report available exclusively on InvestingPro.
In other recent news, Iron Mountain Incorporated reported its fourth-quarter 2024 earnings, which revealed a slight miss on both earnings per share (EPS) and revenue compared to analyst forecasts. The company posted an EPS of $0.50, falling short of the expected $0.51, and revenues reached $1.58 billion, below the anticipated $1.6 billion. Despite these misses, Iron Mountain’s full-year 2024 revenue increased by 12% year-over-year to $6.15 billion, with adjusted EBITDA rising by 14% to $2.24 billion. Meanwhile, UBS analyst Kevin McVeigh maintained a Sell rating on Iron Mountain, citing concerns over weakening fundamentals, particularly in the storage and service sectors, and a significant churn rate increase in the data center segment.
Additionally, Iron Mountain announced an update on federal income tax considerations related to its REIT status, which is crucial for shareholders to understand the tax implications of holding the company’s shares. The update includes an opinion from Sullivan & Worcester LLP and replaces any inconsistent statements from prior descriptions. The company also highlighted strong growth in its Digital Solutions and Data Center businesses, with a 25% increase in data center revenue to $620 million for the full year.
Looking ahead, Iron Mountain provided a positive outlook for 2025, projecting revenue growth of 9% at the midpoint, with adjusted EBITDA expected to grow by 12%. The company plans to spend upwards of $2 billion in capital expenditures for 2025, alongside a 10% dividend increase, indicating a significant cash flow commitment. These developments reflect Iron Mountain’s strategic focus on expanding its data center capabilities and digital offerings while maintaining compliance with federal tax requirements.
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