On Friday, Stifel maintained its Buy rating on Digital Realty Trust (NYSE:DLR) and increased the price target to $175 from $165. The firm's analyst cites the robust business foundation and favorable market demand trends as key drivers for the company's ability to meet its 2024 guidance. This guidance anticipates cash renewal growth of 5%-7% and net operating income (NOI) growth of 2.5%-3.5%.
Digital Realty Trust is expected to benefit from the current macroeconomic environment and solid industry fundamentals that provide leverage for pricing power and consumer price index (CPI)-based escalators. The company's performance is further supported by the growing importance of artificial intelligence (AI), with expectations for deal acceleration in 2024 following a strong 2023.
The analyst anticipates that Digital Realty will continue to introduce additional capacity in supply-constrained markets, which should help the company secure its leadership position and gain market share. The firm's portfolio is well-positioned to adapt to higher-density AI deployments and new builds are set to incorporate liquid cooling on a larger scale.
Digital Realty's current trading metrics show a price to next twelve months (NTM) enterprise value to EBITDA (EV/EBITDA) multiple of 22.8 times, which is above the five-year average of 21.9 times. Additionally, its price to NTM funds from operations (P/CFFO) multiple of 23.7 times also surpasses the five-year average of 20.1 times. The new price target of $175 implies a multiple of 26.7 times 2024 estimated P/CFFO and 26.1 times 2024 estimated EV/EBITDA.
In other recent news, Digital Realty has made significant strides in its expansion and financial performance. The company recently made a $200 million acquisition of a colocation data center in Slough, marking its debut in the west London market. This move is part of the company's ongoing effort to enhance its global data center platform. The Slough data center will operate on 100% renewable energy, aligning with Digital Realty's sustainability initiatives.
Digital Realty's Q1 2024 performance was a record-breaking period with the highest-ever bookings. The company also announced a public offering of its common stock, expecting to raise approximately $1.47 billion for various corporate purposes. RBC Capital Markets projects revenues and EBITDA for 2024 to be $5.61 billion and $2.88 billion, respectively.
The company has also been the focus of multiple analyst upgrades. Goldman Sachs (NYSE:GS) initiated coverage on the company with a Buy rating, while JPMorgan (NYSE:JPM) and BMO Capital both upgraded Digital Realty Trust's stock. These upgrades reflect the company's strategic positioning within the high-demand data center sector and potential benefits from the increasing demand for data center space.
Lastly, Digital Realty Trust's shareholders approved all nominated board members. These are the recent developments for Digital Realty, which continues to play a critical role in the digital economy.
InvestingPro Insights
As Stifel maintains its optimistic view on Digital Realty Trust (NYSE:DLR), recent data from InvestingPro further enriches the investment picture. Digital Realty's market capitalization stands at a robust $52.22 billion, reflecting its significant presence in the specialized REITs industry. Despite a high P/E ratio of 42.65, the company's revenue growth over the last twelve months has been a healthy 11.67%, indicating a strong business performance. Moreover, with a dividend yield of 3.09% and a history of dividend payments for 21 consecutive years, the company demonstrates a commitment to returning value to shareholders.
InvestingPro Tips suggest that Digital Realty is trading at a low P/E ratio relative to near-term earnings growth and is a prominent player in its industry. With analysts predicting profitability this year and a profitable track record over the last twelve months, the company's financial health appears robust. For investors seeking a deeper analysis, there are additional InvestingPro Tips available, offering insights such as the stock's position in overbought territory and its trading near a 52-week high. To access these valuable tips and more, visit https://www.investing.com/pro/DLR and consider using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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