Citi Downgrades Equinix On Valuation

In a report published Tuesday, Citi analyst Michael Rollins downgraded the rating on

from Buy to Neutral, with a $276 price target. The stock has risen 18 percent year-to-date and 40 percent in the last 12 months. The rise in stock valuation has been driven by improved organic sales growth, the conversion of the company to a REIT, a favorable PLR and the impending acquisition of Telecity. "We believe revenue expectations encapsulate solid sales productivity continuing for the next 9 months (as measured by our gross billings analysis), while we remain encouraged on the early progress for its cloud segment that could drive better financial performance over the next 12-24 months," Rollins said. At the same time, the analyst also expects the Telecity acquisition to lead to net debt leverage at the high end of the company's target range, while also leading to some synergy realization. This implies that Equinix's incremental buyback initiatives are unlikely to be implemented in 2016, since the company is expected to focus on incremental geographic expansion.