Equinix Inc (EQIX) Likely to Be Embraced By REIT Market

March 18, 2015

Equinix Inc (EQIX) is converting to REIT effective this year. David Rodgers, Analyst with Robert W. Baird & Co., says he hasn’t decided yet whether he’ll add the stock to his coverage, but he believes it will receive a warm reception in the REIT market.

“I think with regard to the pluses and minuses of conversion, I don’t know that there are too many detrimental impacts for a company like that,” Rodgers says. “Obviously over time they end up picking up the tax efficiency benefits, the ability to return more capital to investors, and I think that a company like Equinix can probably continue to generate a sufficient amount of cash flow to support their own growth as we see with CoreSite and DuPont in particular.”

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Rodgers says the change opens Equinix up to a broader group of investors. Historically, he says technology investors will invest in REITs as they see appropriate, but REIT investors are often hesitant to invest in technology stocks that are outside of the major indices.

“And I think with regard to the reception to Equinix from the REIT investors, it still looks like the company’s holders are fairly highly skewed toward generalist investors, hedge funds and technology-oriented investors from what I can tell,” Rodgers says. “So I think the bigger read through will be after Equinix is added to the major REIT indices; how does the REIT market adapt at that point? We think that it will be accepted just as Digital, DuPont, CoreSite and the others have been.”