UPDATE: D.A. Davidson & Co. Initiates Coverage on InterNAP Network Services with Buy Rating, $9 PT as New Capacity, Cloud Services Drive Accelerated Growth

In a report published Thursday, D.A. Davidson & Co. analyst Mark Kelleher initiated coverage on InterNAP Network Services INAP with a Buy rating and $9.00 price target. In the report, D.A. Davidson & Co. noted, “Cloud services from the company's Voxel acquisition continues to gain momentum, as does the company's hosting services. These offerings carry higher gross margins and generate higher revenue per square foot than pure colocation services. Over the past two years Internap has added significant colocation capacity in cities such as Dallas, Atlanta, Seattle and Santa Clara. Additional capacity will soon be coming online in Boston and New Jersey, which will provide further revenue potential to the Data Center Services (DCS) division. INAP's ISP revenue continues its slow decline, but it accounted for 35% of revenue in the most recent quarter. This percentage should continue to decline, allowing DCS growth to become more apparent. The ISP division generates good cash flow to fund the DCS expansion; a funding source many competitors lack.” InterNAP Network Services closed on Wednesday at $6.70.