Equinix Inc (NASDAQ:EQIX)’s portfolio of assets is well-positioned in areas where infrastructure demands are becoming more distributed, cloud-connected and on-demand, wrote UBS analysts in a note to clients.
They boosted their 12-month target price on Equinix, which specializes in internet connection and data centers, to $900 per share, from $765 previously, based on 23 times earnings before interest, taxes, depreciation and amortization (EBITDA) and 25 times adjusted funds from operations (AFFO).
“We believe a premium is now justified given potential upside from generative AI and durable growth over the next five years,” the analysts stated.
They also noted that Equinix's analyst day highlighted a growing addressable market with enterprise IT still in the early stages of transformation along with new five-year financial targets that were ahead of UBS' estimates.
“With rising demand for data centres, services and AI infrastructure, management sees a $665 billion total addressable market by 2026, or a $140 billion serviceable opportunity based on current operations,” they added.
Equinix Inc (NASDAQ:EQIX)’s new five-year outlook includes revenue growth of 8% to 10% per year through 2027, with potential AI upside, along with falling costs that are expected to drive AFFO per share growth of 7% to 10% annually through 2027, which should allow the company to increase its dividend by 10% plus per year, according to analysts at UBS.
Shares of Equinix slipped 3% to $746.69 in midday trading on Thursday but have gained 13% in the year to date.
Contact Sean at sean@proactiveinvestors.com