Why CoreSite Realty Has A 'Compelling' Entry Point Right Now

• The share price of CoreSite Realty Corp. COR has risen 32.49 percent in the last year and almost 19 percent year-to-date.
• Jefferies’ Jonathan Petersen upgraded the rating on CoreSite Realty from Hold to Buy, while raising the price target $50 to $60.
• The stock offers an attractive entry point, with CoreSite Realty’s well connected and well located portfolio expected to yield above average FFO growth in future.

“We estimate that approximately a quarter of COR’s revenue comes from data centers that house the primary interconnection point in their respective market, … through which nearly all traffic into and out of Los Angeles must travel,” analyst Jonathan Petersen stated.

The rest of the company’s revenue is generated from data centers that have good access to fiber lines and “are generally in close proximity to the primary interconnection points and act as “spill-over” data centers,” the Jefferies report said.

Apart from the attractive locations, CoreSite Realty’s existing development projects involve the building of new rooms within existing shells. This means that a large part of the spending has already occurred in the construction of the shell and that this development would lead to above average yields for the company, driving robust FFO growth over the next few years.

The company reported its 2Q15 earnings well ahead of the Street expectations, while raising the midpoint of its guidance. The beat and raise quarter was driven by new leasing, which would contribute annual revenue of $19.6 million, double the average of the last four quarters.

“Additionally, cash rent growth on renewals was at the highest level since 3Q13,” Petersen added.