Digital Realty Trust ( NYSE: DLR ) stock slid 2.9% in Wednesday premarket trading after Wells Fargo analyst Eric Leubchow downgraded the data center REIT to Equal Weight, citing "emerging risks to the 2023 outlook."
On the flip side, rival Equinix ( NASDAQ: EQIX )" is the best positioned to navigate" macro pressures such as rising costs of capital and a potential slowdown in hyperscale demand, the analyst wrote in a note.
His bullish stance on EQIX for 2023 is underpinned by a number of positive developments, including record leasing and backlog heading into the fourth quarter as well as a conservative balance sheet. Earlier this week, Cowen classified EQIX as a best idea for 2023 and upgraded it to Outperform from Market Perform.
For DLR, though, Leubchow highlighted a number notable risks: "(a) $1.7B of funding requirements at substantially higher rates; (b) a reliance on asset recycling in an environment in which bid/ask spreads have started to widen; (c) uncertainty on scale renewals, particularly with a short-term lease extension from 2022; (d) lack of clarity on power availability for 62 MWs of backlog in Ashburn; (e) a slowdown in new lease volumes; and (f) a levered balance sheet with $1.5B of floating rate deb," according to the note.
Seeking Alpha contributor On the Pulse, meanwhile, viewed DLR as a Buy given its compelling valuation and moderate pay-out ratio. By comparison, the Quant system screened the stock as a Sell, with the poorest marks in valuation and revisions.
On Tuesday, Digital Realty CFO came to power to top job .
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Digital Realty stock dips after Wells Fargo downgrades, prefers Equinix