What Started In Vegas Isn't Staying In Vegas: Switch Goes Global

Switch Inc SWCH, a developer and operator of data center facilities and related products and services, saw its stock soar 20 percent on its first day of trading in early October, but has since lost all momentum.

The Analyst

Credit Suisse's Sami Badri maintains an Outperform rating on Switch's stock with an unchanged $22 price target.

The Thesis

Credit Suisse hosted members of Switch's management team at the 21st Credit Suisse Technology, Media, and Telecom Conference and left "confident" in the company's ability to replicate its Las Vegas Prime campus model in international markets, Badri said. (See Badri's track record here.) 

The company's representatives discussed progress in securing tenants in Thailand and Italy, both of which are power-intensive customers, the analyst said.

Aside from an international expansion, many aspects of Switch's domestic business are performing well, Badri said. For instance, gaming companies  leveraging Switch's power distribution are pulling twice as much power than Amazon.com, Inc. AMZN's cloud facility power draw levels, which reaffirms the company's superior capabilities, the analyst said. 

The multi-tenant data center market is expected to grow at a 9 percent compounded annual growth rate over the next five years, but Switch's growth rate is projected to be twice that rate over the same time period, Badri said. At the same time, Switch will generate in-line or higher EBITDA margins versus its peers, making it "a unique player in the data center space and a direct proxy to seizing the rise of the data center cloud opportunity."

Price Action

Shares of Switch hit a new all-time low of $17 on Wednesday and are down 18 percent since its IPO.

Related Links:

Switch's Q3 Beat A Sign Of Things To Come, Says Credit Suisse

Switch Impresses BMO With First Quarterly Report: 'A Long Runway For Future Growth'

Photo courtesy of Switch.