Digital Infrastructure: A Booming Sector
The past three decades have witnessed the internet’s transformative influence, reshaping how we conduct business, learn, work, and entertain ourselves. From the dot-com boom and bust to the rise of social media and the recent surge in artificial intelligence, the digital landscape has undergone a continuous evolution. underpinning this rapid expansion is a robust and ever-growing digital infrastructure network, encompassing data centers, fiber-optic cables, cell towers, and other essential hardware and facilities that power our digital connections.
Analyst Greg Miller from JMP emphasizes the magnitude of this infrastructure boom, stating, “We are in the midst of the largest digital infrastructure spend since the creation of the internet. Over the next five years, we expect well over $1.0 trillion in digital infrastructure spending that will become the backbone of AI, cloud, and edge compute, and likely a wide variety of other applications we have yet to conceive.”
miller believes this trend signifies only the beginning: “We believe we are in the early stages of elevated digital infrastructure spending for the next several years that will likely lead to positive estimate revisions, and also multiple expansion for the stocks in the digital infrastructure universe.”
Recognizing this potential, Miller has identified several digital infrastructure stocks poised for robust growth. utilizing the TipRanks database, two of these companies stand out, both carrying a “Strong Buy” rating from wall Street. Let’s delve into the specifics of these compelling investment opportunities.
DigitalBridge Group (DBRG)
Headquartered in Boca Raton,Florida,DigitalBridge boasts a global presence with offices strategically located in key markets like New York and Los Angeles in the US,and London and Singapore internationally. Boasting $88 billion in assets under management,DigitalBridge’s portfolio comprises investments in 45 digital infrastructure companies,showcasing its extensive reach and expertise within the sector.
In its recent third-quarter 2024 earnings report, DigitalBridge missed revenue expectations, coming in at $76 million, which was $23.15 million lower than anticipated. Though, the company exceeded earnings-per-share expectations, realizing 6 cents per share in distributable earnings compared to the forecasted 1 cent. This performance seems to align with Miller’s optimistic outlook,earning him an “Outperform” (Buy) rating on DBRG. Moreover, his price target of $16 suggests a potential one-year upside of 53%. To delve deeper into Miller’s track record, you can access it here.
Riding the Data wave: Equinix and DigitalBridge
In the rapidly expanding world of data centers, two companies stand out: DigitalBridge and Equinix. Both are capitalizing on the insatiable demand for computing power fueled by artificial intelligence, cloud computing, and a growing digital economy.
DigitalBridge, a global real estate investor specializing in infrastructure, boasts a bullish outlook. Analysts overwhelmingly recommend a “Buy” on the stock, with a consensus rating of “Strong Buy.” Their average price target of $16.70 suggests a significant potential gain of 59.5% over the next year.
Equinix, conversely, is a global leader in the colocation data center market. Imagine a bustling city with office buildings for businesses of all sizes – that’s essentially what Equinix offers, but for data. Their data centers provide the physical space, power, and connectivity for companies to store and process vast amounts of details.
“Data centers are big business,” explains a leading industry analyst, “fueled by the AI boom, the expansion of cloud computing, and increasing demand for high-speed computing – and Equinix is right there in the middle of it.”
With over 260 data centers spanning 73 major urban areas worldwide, Equinix serves an notable clientele. Their roster includes over 10,000 customers, with well over 300 being fortune 500 companies. This global network allows businesses seamless access to the infrastructure they need to thrive in the digital age.
However, Equinix’ recent financial performance has raised some eyebrows. While revenue reached $2.2 billion in the third quarter of 2024, a 7% year-over-year increase, analysts are seeking deeper insights into future growth prospects.
Is Equinix Stock Poised for Growth?
Equinix, a leading provider of data center and colocation services, recently released its quarterly earnings, revealing both promising trends and areas where it fell short of expectations. While the company celebrated 87 consecutive quarters of revenue growth, its funds from operations (FFO) per share came in at $6.36, missing the forecast by 9 cents. Despite this slight miss,the company’s performance underscores its resilience and market dominance in the crucial data center industry.
Analysts remain bullish on Equinix’s prospects.Miller, as a notable example, maintains an “Outperform” rating (equivalent to “Buy”) on EQIX shares with a price target of $1,200. this ambitious target implies a potential 32% surge in the share price over the coming year, a testament to the analyst’s confidence in Equinix’s future.
The overall sentiment on Wall Street echoes this optimism. Equinix has garnered 22 recent reviews from analysts, with 18 rating the stock as “Buy” and 4 as “Hold,” granting it the coveted “Strong Buy” consensus. Currently trading at $906.81 per share, the average target price of $1,027.90 suggests a potential 13% growth over the next year.
For investors seeking to capitalize on promising growth opportunities, TipRanks’ “Best Stocks to Buy” tool offers invaluable insights. This thorough resource consolidates all of TipRanks’ equity analyses, empowering investors to make well-informed decisions.
What are some potential long-term risks to consider when investing in digital infrastructure?
Digital Infrastructure: Riding the Data Wave with Greg Miller
The internetS transformative impact on our lives is undeniable. From revolutionizing how we communicate and learn to fueling the rise of artificial intelligence, digital infrastructure—the backbone of our connected world—plays a crucial role. Analyst Greg Miller from JMP Securities believes we’re witnessing a period of unprecedented growth in this sector. Archyde News Editor caught up with Miller to delve deeper into the digital infrastructure boom and explore some compelling investment opportunities.
Archyde: Greg, thanks for joining us. Your recent reports highlight a massive surge in digital infrastructure spending. Can you elaborate on the driving forces behind this trend?
Greg Miller: Certainly. We’re witnessing the largest digital infrastructure spend as the internet’s inception. Over the next five years, we expect well over $1 trillion invested in digital infrastructure, fueling advancements in AI, cloud computing, edge computing, and countless other applications we’re yet to imagine.
Archyde: That’s a significant figure. Do you believe this trend is lasting?
Greg Miller: Absolutely. We’re in the early stages of elevated digital infrastructure spending that will likely continue for several years, leading to positive estimate revisions and multiple expansions for stocks in the digital infrastructure universe.
Archyde: Given your expertise, can you pinpoint any specific companies poised for robust growth in this landscape?
Greg Miller: I’m particularly bullish on DigitalBridge Group (DBRG) and Equinix (EQIX). Both companies are leaders in their respective niches, and their growth potential is immense.
archyde: Let’s dive deeper into DigitalBridge.Their recent earnings missed revenue expectations, yet exceeded EPS. How do you reconcile this apparent discrepancy?
Greg Miller: While DigitalBridge’s revenue fell short, exceeding earnings-per-share expectations speaks volumes about the company’s operational efficiency and focus on profitability. Their global reach, portfolio diversification, and strategic investments across various digital infrastructure segments position them for continued growth.
I maintain an “Outperform” rating on DBRG with a price target of $16, implying a potential upside of 53%.
Archyde:
Moving on to Equinix, their dominance in the colocation data center market is undeniable. Though, analysts are scrutinizing their recent earnings closely. Where do you see Equinix heading?
greg Miller: Equinix remains a dominant force in data centers, serving a vast global clientele. Despite a slight FFO miss in the latest quarter, their revenue continued to grow, demonstrating the enduring strength of their business model. Their global footprint, strategic acquisitions, and commitment to innovation ensure they remain well-positioned for long-term growth.
I maintain an “Outperform” rating on EQIX with a price target of $1,200,suggesting a potential 32% upside.
archyde: for investors looking to capitalize on these opportunities, where woudl you point them?
Greg Miller: TipRanks’ “Best Stocks to Buy” tool offers a complete analysis of equity opportunities across various sectors.Investors can leverage this resource to identify promising investments aligned with their risk tolerance and financial goals.
archyde: Thank you for sharing your insights,Greg. Your perspective sheds light on the exciting potential of digital infrastructure.
Reader Question:
Given your analysis, do you believe this digital infrastructure boom presents a once-in-a-lifetime possibility for investors, or will there be subsequent waves of growth?
