EQIX - Equinix downgraded to Hold at Truist with stock 'fully valued'
2023-06-27 09:13:07 ET
Truist downgraded Equinix ( NASDAQ: EQIX ) to Hold from Buy on Tuesday owing to the stock becoming "fully valued" in addition to "high expectations and potential deceleration in AFFO growth."
On top of all that, while the data center REIT is poised to benefit from digital transformation, "the uncertain timing of AI adoption raises questions about near-term incremental returns," analyst Anthony Hau wrote in a note.
Management itself said earlier this month that "it's still too early to forecast" whether artificial intelligence would mark a new growth inflection point.
All in, Hau sees company's AFFO earnings growth falling to 6.6% in 2024 from 9.6% in 2023 due to tough comparisons, interest expenses, higher capital expenses, and a tough economic outlook. He added that "long-term AFFO growth could be affected by the higher cost of debt as a significant amount of debt matures in the next five years."
On the valuation front, EQIX is trading at 22.5 times 2024 estimated AFFO, "commanding a premium of 6x over digital infrastructure peers compared to the historical average of one-turn premium," the note said. Year-to-date, the stock climbed 14.7%.
The Hold rating aligns with the SA Quant system rating, with the best marks in revisions and momentum, and disagrees with the average sell-side analyst rating of Buy.
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Equinix downgraded to Hold at Truist with stock 'fully valued'