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Here's Why You Should Retain Equinix (EQIX) Stock for Now
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Equinix, Inc. (EQIX - Free Report) is seeing solid demand for interconnected data-center space at its facilities, stemming from the rising need for digital infrastructure and cloud adoption. While expansion efforts amid this backdrop are strategic fits, such moves involve huge capital outlays.
Markedly, technological advancements such as The Internet of Things, 5G, autonomous vehicles and artificial intelligence are driving digital transformation. Moreover, escalating growth of data, rapid accelerations in cloud adoption and greater demand for IT outsourcing have propelled the demand for data-center infrastructure.
Hence, as infrastructure providers for this rapidly-growing digital economy, data center providers such as Equinix, Digital Realty Trust (DLR - Free Report) , CyrusOne Inc. and CoreSite Realty Corporation (COR - Free Report) are well-placed for sustainable growth.
As for Equinix, the company is capitalizing on such tailwinds by developing and acquiring data centers globally. Specifically, in March 2021, it announced plans to open its first data center in Bordeaux, France, in third-quarter 2021.
Moreover, the company is making progress with its $3-billion xScale data-center program to develop and operate facilities in Brazil, Europe and Japan through joint ventures (JV). This JV approach is a strategic fit to pursue hyperscale deployments in desired markets and provide incremental cash flows without straining the company’s balance sheet.
Other than acquisitions, the company is increasing its service offerings and interconnection solutions. In fact, acceleration in enterprise cloud adoption and increasing cloud or Internet customers’ demands for the highly interconnected data center space is strengthening Equinix’s interconnected ecosystem and will likely boost monthly recurring revenues.
It also has a disciplined debt and equity funding strategy to support organic and acquisition-driven growth.Additionally, as of Dec 31, 2020, the company had $3.5 billion in available liquidity that is sufficient to meet operating requirements, fund acquisitions and pay dividends.
However, at the end of fourth-quarter 2020, Equinix had a total debt principal outstanding of $12.5 billion. Hence, capital-intensive expansion efforts to satisfy the growing demand for colocation and interconnection services are likely to increase its debt.
Equinix currently carries a Zacks Rank #3 (Hold). Shares of the company have gained 3.7% over the past year compared with the real estate market’s rally of 30.7%.
Also, integration costs related to acquisitions will likely impede its bottom-line growth. Further, while investments in business and new products, and enhancement of its go-to-market footprint are likely to propel long-term growth, the same is expected to hinder margin growth in the near term.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Here's Why You Should Retain Equinix (EQIX) Stock for Now
Equinix, Inc. (EQIX - Free Report) is seeing solid demand for interconnected data-center space at its facilities, stemming from the rising need for digital infrastructure and cloud adoption. While expansion efforts amid this backdrop are strategic fits, such moves involve huge capital outlays.
Markedly, technological advancements such as The Internet of Things, 5G, autonomous vehicles and artificial intelligence are driving digital transformation. Moreover, escalating growth of data, rapid accelerations in cloud adoption and greater demand for IT outsourcing have propelled the demand for data-center infrastructure.
Hence, as infrastructure providers for this rapidly-growing digital economy, data center providers such as Equinix, Digital Realty Trust (DLR - Free Report) , CyrusOne Inc. and CoreSite Realty Corporation (COR - Free Report) are well-placed for sustainable growth.
As for Equinix, the company is capitalizing on such tailwinds by developing and acquiring data centers globally. Specifically, in March 2021, it announced plans to open its first data center in Bordeaux, France, in third-quarter 2021.
Moreover, the company is making progress with its $3-billion xScale data-center program to develop and operate facilities in Brazil, Europe and Japan through joint ventures (JV). This JV approach is a strategic fit to pursue hyperscale deployments in desired markets and provide incremental cash flows without straining the company’s balance sheet.
Other than acquisitions, the company is increasing its service offerings and interconnection solutions. In fact, acceleration in enterprise cloud adoption and increasing cloud or Internet customers’ demands for the highly interconnected data center space is strengthening Equinix’s interconnected ecosystem and will likely boost monthly recurring revenues.
It also has a disciplined debt and equity funding strategy to support organic and acquisition-driven growth.Additionally, as of Dec 31, 2020, the company had $3.5 billion in available liquidity that is sufficient to meet operating requirements, fund acquisitions and pay dividends.
However, at the end of fourth-quarter 2020, Equinix had a total debt principal outstanding of $12.5 billion. Hence, capital-intensive expansion efforts to satisfy the growing demand for colocation and interconnection services are likely to increase its debt.
Equinix currently carries a Zacks Rank #3 (Hold). Shares of the company have gained 3.7% over the past year compared with the real estate market’s rally of 30.7%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Also, integration costs related to acquisitions will likely impede its bottom-line growth. Further, while investments in business and new products, and enhancement of its go-to-market footprint are likely to propel long-term growth, the same is expected to hinder margin growth in the near term.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>