Data centers are expected to continue growing as demand grows for bandwidth-heavy online content and online data traffic flow grows more robust, causing stable pricing even as data centers continue to expand geographically, says Ilya Grozovsky, a Managing Director at Morgan Joseph TriArtisan LLC.
“Pricing is stable in essentially all geographic regions. Companies are willing to sign long-term contracts with built-in price escalation. The users continue to feel like they need to lock in the current prices. And expansions continue in the facilities,” Grozovsky said.
Grozovsky has a “buy” rating on Equinix (EQIX), a global operator of retail data centers. He says EQIX can fund its own growth despite selling $750 million of senior notes to refinance debt and build out its facilities, and he says the company offers a good value play that doesn’t have a takeout premium yet.
“Equinix, we feel, is putting up very strong results and has essentially the same trends that its peers do and yet trades at a discount,” Grozovsky said. “We think that it has very strong fundamentals and is trading at a discount to its peers, and that tells me it’s a good buy.”
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