Canaccord's Paul Morgan has initiated coverage on QTS Realty Trust Inc (NYSE: QTS) with a $63 price target and a Buy rating.
Enterprises and government agencies have become extremely open to cloud IT architectures and the "breadth of QTS service offerings, from custom data centers to colocation to managed cloud services, helps new customers migrate from legacy on-premises infrastructures," Morgan noted. A majority of QTS's customer base uses a "C" product and the analyst expects this trend to grow.
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Huge scale conversions offer power sources at a heavily discounted price. QTS's large-scale industrial plants enable them to source "mega-data centers" Morgan said. The facilities are expected to bring in $233 million in 2016. QTS also doubled its lease commitment in a Dallas data center and plans to open its newest data center conversion in Chicago by Q3.
The acquisition of Carpathia Hosting in 2015 is another growth driver. Carpathia Hosting is a high-level security and compliance service provider. The "deal added 13 properties and 9mW of power, with Carpathia's IBX Vault providing leasing synergies with QTS Richmond, particularly for federal government customers" Morgan stated.
QTS shares traded down on Monday at $53.25.
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