On Tuesday, Digital Realty Trust (NYSE:DLR) received an upgrade from Wells Fargo, transitioning from an Equal Weight to an Overweight rating. Accompanying this upgrade is a significant lift in the price target for the company's shares, now set at $155.00, up from the previous target of $135.00.
The upgrade comes with a positive outlook on the company's potential to boost its leasing volumes significantly in 2024. Wells Fargo projects an increase of over $600 million in leasing volumes for Digital Realty. The analyst pointed to the company's ample sellable capacity across its top 10 markets, which exceeds 300 megawatts (MWs). These markets are currently experiencing vacancy rates at or below 5%, which is about half the historical average, suggesting a tighter supply that could lead to nearly $700 million in added rental income.
Digital Realty's strategic capacity in Northern Virginia (NoVA) is highlighted as particularly advantageous. The company is expected to have 96 MWs of capacity available through 2025 in this region. The NoVA market is described as being severely constrained, which implies a strong demand for data center space. The rental rates in this area are estimated to range between $150 to $170 per kilowatt (kW), indicating a potential for substantial leasing activity in the near term.
InvestingPro Insights
As Digital Realty Trust (NYSE:DLR) garners positive attention with its recent upgrade by Wells Fargo, key financial metrics from InvestingPro provide additional context for investors. Digital Realty is trading at a P/E ratio of 47.03, which, when adjusted for near-term earnings growth, appears low, suggesting that the stock may be undervalued relative to its growth potential. This aligns with the analyst's optimistic leasing volume forecast for 2024. Additionally, the company's revenue growth over the last twelve months is impressive at 16.44%, reflecting its strong performance in the specialized REITs industry.
InvestingPro Tips highlight that Digital Realty has been a consistent performer, maintaining dividend payments for 21 consecutive years, which could be a sign of the company's financial stability and commitment to shareholder returns. Moreover, the company has seen a high return over the last year, with a 63.86% price total return, indicating robust investor confidence which may continue following the analyst's forecast.
For investors seeking to delve deeper into Digital Realty's financial health and future prospects, there are additional InvestingPro Tips available, providing a comprehensive analysis of the company's valuation and market position. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and gain access to these insights which could further inform investment decisions.
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