Three data center stocks to buy offer investors an opportunity to profit from growing collation services providers that are supporting growth in the information technology (IT) world.
The three data center stocks to buy are expected to “outperform” the market’s overall performance, according to ISI Evercore, an investment firm that recently initiated coverage of the industry. ISI Evercore’s coverage will feature U.S.-headquartered colocation services providers as the industry composes a total available market of roughly $37 billion, fueled by a compound annual growth rate (CAGR) of 7%.
Given the foundational, but often underappreciated role of multi-tenant data centers as key cogs within a hybrid IT world, ISI Evercore sees a fertile field for investors. The combination of “exponential data creation,” traffic growth and digital transformation initiatives across enterprise, cloud, service providers, public sector and demand for optimized IT performance should drive sector growth, ISI Evercore wrote in its research note.
Three Data Center Stocks to Buy Can Be Purchased Through REITs
Plus, the real estate investment trust (REIT) structure makes data center stocks a unique asset class that should appeal to a broad range of investors, according to ISI Evercore. Despite concerns about the threat of public cloud and commoditization of data center services, ISI Evercore forecasts hyperscale growth.
“In addition, there are opportunities for companies to differentiate via interconnection and adjacent offerings such as managed services,” ISI Evercore wrote. Within this industry, we favor companies that have global scale and the ability to attach value-add services.”
Equinix Rates as One of the Three Data Center Stocks to Buy
Equinix (NASDAQ: EQIX), of Redwood City, California, is a Silicon Valley, multi-tenant data center provider that allows competing networks to connect and share data traffic securely. The name Equinix was chosen to reflect the company’s focus on equality, neutrality and internet exchange.
ISI Evercore ranked Equinix as one of three data center stocks that the investment firm expects to outperform the market. Equinix received a target price of $950 from ISI Evercore.
Chart courtesy of www.stockcharts.com
Digital Realty Trust Secures Spot Among Three Data Center Stocks to Buy
San Francisco’s Digital Realty Trust, Inc. (NYSE: DLR) supports data center, colocation and interconnection strategies of customers worldwide, ranging from cloud and information technology services, communications and social networking. It also serves financial services, manufacturing, energy, health care and consumer markets.
ISI Evercore gave Digital Realty Trust, Inc. (DLR) an outperform rating and a target price of $180.
Chart courtesy of www.stockcharts.com
CyrusOne Captures Slot Among the Three Data Center Stocks to Buy
Dallas-based CyrusOne, Inc. (NASDAQ: CONE) has a wide portfolio that includes more than 40 enterprise-class facilities across three continents, and more than 4 million square feet of total net rentable square footage. Recent developments at CONE could create near-term catalysts for the stock, ISI Evercore wrote.
Customers lower short and long-term capital and operating costs by designing customized data center solutions tailored to a company’s current and future IT needs. Those customers also can reallocate precious IT resources back to driving innovation and growth for their core business.
Chart courtesy of www.stockcharts.com
ISI Evercore wrote positively about the recent return of CONE’s co-founder as chief executive officer, warranting an “attractive valuation” that creates a “tactical buying opportunity” in the stock. The investment bank gave the stock an “outperform” rating and a target price of $100 per share.
Three Data Center Stocks to Buy Omit CoreSite Realty Corp.
ISI Evercore added Denver’s CoreSite Realty Corporation (COR) as a fourth data center stock that it included in its new coverage but rated it as an “in line” prospect, not one of the sector’s three stocks that it predicts will “outperform” the market. The stock appears “fairly valued” at current levels with a target price of $154, the investment firm wrote.
The company uses a cloud, interconnection and colocation platform to design, plan and implement its hybrid, multi-cloud IT solution. With CoreSite, businesses have optionality to allow cost-effective growth within network-dense edge markets.
Chart courtesy of www.stockcharts.com
Growth drivers for the sector include data increases and creation; demand for digital transformation through optimized IT infrastructures, flexibility and scalability modularity; migration toward a hybrid IT architecture; and adoption of distributed IT architectures becoming the norm, ISI Evercore wrote. In addition, vendors can differentiate their offering with innovation via value-add services to achieve higher pricing and lower commoditization risk.
Also expect the public cloud to be a net positive for the colocation industry, ISI Evercore continued. And scale will matter as colocation companies with a global presence benefit from their increased geographic flexibility amid continued industry consolidation.
Pension Fund Chief Offers Alternative to Three Data Center Stocks to Buy
“Data centers and cell towers have been a focus of my preferred REIT mutual fund, Cohen & Steers Realty Shares (CSRSX), for a number of years,” said Bob Carlson, who leads the Retirement Watch investment newsletter. “They’ve been among the top sectors in the fund for some time and appear likely to remain so.”
Cohen & Steers identifies these sectors with those that will benefit from major changes that are likely to persist for some time, continued Carlson, who serves as chairman of the Board of Trustees of Virginia’s Fairfax County Employees’ Retirement System with more than $4 billion in assets. The sectors benefit from the increased use of technology, especially mobile technology, he added.
Chart courtesy of www.stockcharts.com
“Data centers benefit from the move of data and computing activities to the cloud instead of servers and hard drives residing at a business or home,” Carlson said.
The top holdings in these sectors for Cohen & Steers recently were American Tower Corporation (NYSE: AMT), Equinix, CyrusOne, Digital Realty Trust, Crown Castle International (NYSE: CCI) and SBA Communications (NASDAQ: SBAC). Investors who want to use a little leverage to benefit from these and other REITs can invest in the closed-end fund, Quality Income Realty (RQI). It has a leverage ratio of about 24% and a recent distribution rate of 7.42%, Carlson added.
Retirement Watch chief Bob Carlson answers questions from Paul Dykewicz.
Stock Picker Likes American Tower as a Recommended Tech Stock
Jim Woods, who leads the Intelligence Report and Successful Investing newsletters, as well as the Bullseye Stock Trader advisory service, recommends American Tower. Woods described the company as a “buy” for subscribers to his Intelligence Report newsletter.
Chart courtesy of www.stockcharts.com
As one of his Income Multiplier picks, Boston-based American Tower has produced an average return of 16% during the past five years. The company is a real estate investment trust and an owner and operator of wireless and broadcast communications infrastructure in several countries worldwide.
Paul Dykewicz meets with Wall Street veteran Jim Woods, editor of Intelligence Report.
COVID-19’s Delta Variant Will Not Stop Three Data Center Stocks to Buy
The highly transmissible Delta variant of COVID-19 has produced a reduced number of cases and deaths in the United States lately but it remains a concern for public health experts who keep urging increased vaccinations and booster shots, as well as mask wearing. The Centers for Disease Control and Prevention (CDC) specifically has blamed the variant for unleashing a resurgence of cases and deaths earlier in the fall.
However, the variant is leading to an jump in the number of people vaccinated from COVID-19. As of Nov. 2, 221,961,370 people, or 66.9% of the U.S. population, have received at least one dose of a COVID-19 vaccine, the CDC reported. The fully vaccinated total 192,726,406 people, or 58.1%, of the U.S. population, according to the CDC.
COVID-19 deaths worldwide, as of Nov. 2, topped the 5 million mark by reaching 5,011,786, according to Johns Hopkins University. Worldwide COVID-19 cases totaled 247,447,923, as of that date.
U.S. COVID-19 cases, as of Nov. 2, reached 46,140,129 and caused 748,173 deaths. America has the dreaded distinction as the country with the most COVID-19 cases and deaths.
The three data center stocks to buy can help investors to profit amid the pandemic and ride a technology wave that is sweeping the world.
Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Seeking Alpha, GuruFocus and other publications and websites. Paul, who can be followed on Twitter @PaulDykewicz, is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Paul also is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The book is great as a gift and is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many others. Call 202-677-4457 for special pricing.
