Equinix Inc. Hits 52-Week High - Analyst Blog

Shares of Equinix Inc. EQIX hit a new 52-week high of $206.19 on Jun 13, eventually closing at $206.04. The closing share price represents a one-year return of 6.7% and a year-to-date return of 17.9%. Average volume of shares traded over the last 10 days (893K) increased from the average volume of shares traded over the last three months (852k).

This Zacks Rank #3 (Hold) company has a market cap of $10.26 billion with long-term earnings growth expectations of 17.7%.

Growth Drivers

Some of the current optimism surrounding the shares is related to its recent deal with Orange Business Services, a worldwide provider of IT and communications services. Orange Business Services will offer its Business VPN Galerie to Equinix' International Business Exchange (IBX) data centers in North America, Europe and the Asia-Pacific. We believe that this recently won contract will improve its business volume and strengthen its market position.

Furthermore, Equinix recently announced the availability of its business solutions in its DA6 International Business Exchange (IBX) data center in Dallas, Texas. The opening is in line with the company's expansion plan and is expected to strengthen its footprint in the U.S. It will also serve the growing demand for interconnection and colocation services in Dallas, the fourth largest metro in the country.

The recent price appreciation can also be attributed to the data center business, which is thriving across geographies and the company is uniquely positioned to capitalize on this opportunity. Consequently, Equinix is planning to further expand its Solution Validation Center in multiple locations in 2014.

Moreover, Equinix reported better-than-expected first-quarter of fiscal 2014 results, which came ahead of the Zacks Consensus Estimate. Total revenue in the reported quarter was $580.1 million, up 12.4% from the year-ago quarter. Growth across geographies and business segments helped revenues to improve on a year-over-year basis.  Robust growth in revenues from Equinix's Cloud and IT services (up 15% year over year) also positively impacted total revenue.

Additionally, Equinix' data center platform has been popular in the financial services, networking and content management industries. Equinix has taken advantage of the fact that many firms in these industries are setting up their bases in South America. Considering the growth prospects in the region, particularly in Brazil, we believe that Equinix will be able to secure a solid revenue stream.

Going forward, Equinix is also expected to gain from its recent alliances with Verizon VZ, and AT&T T and its proposed conversion to a real estate investment trust (REIT).

On the flip side, European exposure and industry consolidation remain headwinds. Moreover, the company's highly leveraged balance sheet is also a concern.

Stocks That Warrant a Look

Micron Technology Inc. MU is a better-ranked technology stock carrying a Zacks Rank #1 (Strong Buy).