Mizuho raises price targets for Digital Realty and Equinix due to strong data center sector.

From Investing.com: 2024-12-11 02:15:31

Mizuho Securities raises price targets for Digital Realty Trust Inc and Equinix Inc due to strong cloud and AI investments in the data center sector for fiscal 2025. However, the firm remains neutral on tower REITs like American Tower Corp due to uncertainties in carrier capex and 5G rollout pace.

Cloud and AI capex are expected to drive robust data center demand in FY25, with cloud spending projected to grow nearly 20% annually to $1.34 trillion by 2027, and AI capex potentially reaching $310 billion by 2026. These trends support solid bookings and pricing power for data center operators.

Mizuho increases Digital Realty Trust’s price target to $211 from $170, highlighting its ability to sustain pricing power with 10% annual rent spreads over the next two years. Record bookings of $505 million in Q3 2024 demonstrate strong demand, with FFO growth expected to reach high single digits by FY26.

Equinix sees a price target raise to $1,094 from $971, despite investor concerns over delayed AI capital deployment. The enterprise colocation business is projected to achieve high single-digit monthly recurring revenue growth in FY25, with EBITDA margins nearing 49% by FY26.

Mizuho expresses caution on tower REITs, maintaining a “Neutral” rating on American Tower Corp with no changes to its price target. While carrier activity showed a slight increase in late 2024, tower job postings remain low, indicating subdued growth in 2025-26.



Read more at Investing.com: Mizuho sees strong FY25 for data centers; Digital Realty, Equinix get PT boost By Investing.com