Here's Why It's Wise to Retain Equinix (EQIX) Stock Now Equinix (EQIX) is likely to benefit from increasing data-center demand. However, a competitive landscape and huge capital outlays remain concerns.

By Zacks Equity Research

This story originally appeared on Zacks

- Zacks

Equinix's EQIX is well-positioned to gain from tailwinds, such as high demand for inter-connected data-center space, driven by the acceleration in enterprise cloud adoption and the increasing cloud or Internet customers' demands. To cater to this rising demand, EQIX is expanding its International Business Exchange data centers, globally. However, huge capital outlays required for expansion moves act as headwinds. Also, intense competition from the carrier-neutral data centers is concerning.

High growth in cloud computing, the Internet of Things and big data, and elevated demand for third-party IT infrastructure are spurring demand for data-center infrastructure. Moreover, growth in artificial intelligence as well as autonomous vehicle and virtual/augmented reality markets is anticipated to be robust over the next five-six years.

Equinix is capitalizing on these tailwinds by developing and acquiring data centers, globally. Earlier this month, EQIX announced its plan to tap the growing African market with the takeover of MainOne. EQIX's efforts to bolster its presence in Africa will add scale and strengthen its position in the region, while helping it benefit from sturdy growth of data consumption.

Earlier this month, Equinix announced a multi-year partnership with Nasdaq. This extended alliance reflects buoyant demand for Equinix's data-center infrastructure amid robust growth in cloud computing.

Shares of this currently Zacks Rank #3 (Hold) player have appreciated 6% in the past six months, outperforming the industry's rise of 0.4%. However, the Zacks Consensus Estimate for its 2021 funds from operations (FFO) per share has moved south marginally to $27.1 over the past month.

Zacks Investment ResearchImage Source: Zacks Investment Research

Equinix plans to add data centers in the coming quarters to satisfy growing demand for colocation and interconnection services. Although such moves are a strategic fit, the same requires huge capital outlays and is likely to affect near-term performance.

Also, considering the strong growth potential of this industry, competition is expected to increase from the existing as well as new players into the space. The intensified competition could prompt competitors to resort to aggressive pricing policies, making Equinix vulnerable to pricing pressure.

Stocks to Consider

Some better-ranked stocks from the REIT sector are OUTFRONT Media OUT, Cedar Realty Trust CDR and Condor Hospitality Trust CDOR.

OUTFRONT Media flaunts a Zacks Rank #1 (Strong Buy) at present. Shares of OUT have gained 11% in the past six months.

The Zacks Consensus Estimate for OUTFRONT Media's 2021 FFO per share has been raised 13.8% over the past two months. OUT's 2021 FFO per share is expected to increase 45.71% from the year-ago reported figure. You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Cedar Realty's current-year FFO per share has been raised 2.6% to $2.36 in the past two months. Over the last four quarters, CDR's FFO per share surpassed the consensus mark twice and missed the same on the other two occasions, the average surprise being 6.4%.

Currently, CDR sports a Zacks Rank of 1. Shares of Cedar Realty have appreciated 51.6% in the past six months.

The Zacks Consensus Estimate for Condor Hospitality Trust's 2021 FFO per share has been raised 25.8% over the past two months. CDOR's 2021 FFO per share is expected to increase significantly from the year-ago reported figure.

Condor Hospitality sports a Zacks Rank of 1 at present. Shares of CDOR have rallied 31.4% in the past six months.

Note: Anything related to earnings presented in this write-up represent FFO — a widely used metric to gauge the performance of REITs.


Zacks Top 10 Stocks for 2022

In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2022?

From inception in 2012 through November, the Zacks Top 10 Stocks gained an impressive +962.5% versus the S&P 500's +329.4%. Now our Director of Research is combing through 4,000 companies covered by the Zacks Rank to handpick the best 10 tickers to buy and hold. Don't miss your chance to get in on these stocks when they're released on January 3.

Be First To New Top 10 Stocks >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Equinix, Inc. (EQIX): Free Stock Analysis Report

Cedar Realty Trust, Inc. (CDR): Free Stock Analysis Report

OUTFRONT Media Inc. (OUT): Free Stock Analysis Report

Condor Hospitality Trust, Inc. (CDOR): Free Stock Analysis Report

To read this article on Zacks.com click here.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Business News

Here's What Companies and Services Are Open and Closed on Juneteenth 2025

Juneteenth was designated as a federal holiday in the U.S. in 2021.

Business Ideas

70 Small Business Ideas to Start in 2025

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2025.

Leadership

How to Make Smarter Decisions Under Pressure, From an ER Doctor Who's Done It for 20 Years

We asked an emergency physician who studies decision-making under pressure about leadership. His insights reveal why the best leaders think like scientists of themselves.

Business News

The U.S. Added Over 1,000 New Millionaires a Day in 2024. Here's How That Compares to the Rest of the World.

UBS revealed its latest report on global wealth on Wednesday, which looks back on wealth trends.

Leadership

This Founder Noticed a Stark Change at a Local Pride Parade — and Says It Creates a 'Real Opportunity' for Small Businesses

Tanner Graham, co-founder and CEO of General Idea, reveals how business leaders can step up this month and beyond.

Thought Leaders

I Spent 20 Years Watching Brands Rise or Fade—This Is What Separates Them

Many entrepreneurs turn to PR only when they want immediate results, but strategic visibility is a long game.