UPDATE: ISI Group Upgrades Digital Realty Trust to Buy, Raises PT

In a report published Monday, ISI Group upgraded its rating on Digital Realty Trust

from Hold to Buy, and raised its price target from $68.00 to $72.00. ISI Group noted, “We recently sat down with Mike Foust, CEO of Digital Realty, to discuss the company's leasing progress and outlook for the next 12 months, its capital deployment strategy heading into 2013, and its funding plans for the next 12 to 18 months. Given the stock's significant underperformance since late July (-19% vs. -4% for the REIT sector), a more attractive valuation, and reduced risk of the company missing its Q4 leasing targets, we are upgrading the stock from Hold to Buy and raising our price target from $68 to $72 which is a blend between our 2014 AFFO estimate, our forward NAV, and DCF estimate. Our PT rises entirely on better cash flow metrics as we assume LT leverage rises more than previously modeled (5.2x in 2016 vs. 4.8x previously) in-line with management's exceptions and an increase to our terminal growth rate in our DCF to 2.5% from 2.0% as we are more confident about the medium-term leasing outlook.” Digital Realty Trust closed on Friday at $64.71.