UPDATE: MLV & Co Downgrades Digital Realty Trust On Mixed Factors

In a report published Wednesday, MLV & Co analyst Jonathan Petersen downgraded the rating on Digital Realty Trust DLR from Buy to Hold, but raised the price target from $59.00 to $60.00. In the report, MLV & Co noted, “Given two years of disappointing results, guidance reductions, and a minor accounting problem in 2013, DLR traded at as much as a 25% discount to our NAV estimate. However, since that time, DLR has delivered on operational execution, which has helped to close much of the valuation gap. "Leasing over the past three quarters has been strong, and the company certainly seems to be moving in the right direction. On the 1Q14 earnings call, Interim CEO Bill Stein laid out a good vision to increase return on invested capital through more conservative capital deployment and asset sales. Spurred by this progress, the stock price is up +32% since bottoming in December, outperforming the RMZ by +16%. DLR is now trading at a -1% discount to NAV on our estimates, compared to the company's long-term +7% NAV premium. "However, we do not expect DLR to return to its long-term NAV premium in the near-tem given the uncertainty related to the CEO search, and the need for more quarters of solid leasing results to confirm that recent volumes are sustainable. Accordingly, we are changing our rating to HOLD, but increasing our 2014 YE price target by a dollar, to $60 in light of recent operational performance.” Digital Realty Trust closed on Tuesday at $58.82.