Market Overview

Switch's 15-Megawatt Lease Deal Silences A Sell-Side Bear

Share:
Switch's 15-Megawatt Lease Deal Silences A Sell-Side Bear

Data center company Switch Inc (NYSE: SWCH) signed a new 15-megawatt lease with an unnamed international streaming media company May 4, and the move was notable enough to end Cowen's bearish stance on the stock. 

The Analyst

Cowen's Colby Synesael upgraded Switch from Underperform to Market Perform with an unchanged $14.50 price target.

The Thesis

Switch's 15-MW lease agreement represents at least $100 million in incremental contract value, which implies there is now a "higher likelihood" of the company hitting its guidance, Synesael said in the upgrade note.

Switch guided 2018 revenue to a range of $423 to $440 million, which at the midpoint implies a 14.1-percent growth rate. At that time, investors had reason to question the guidance, as the company's first-quarter revenue was estimated to come in at $98.9 million, Synesael said. 

The exact terms of Switch's new agreement are unknown, and it would be reasonable to assume the 15-MW deal is priced at $110/kW, which is an estimated price for the given size, the analyst said. This implies an annual contract value of $20 million per year, or a $10-million contribution in the back half of 2018, he said. 

The new agreement by itself doesn't guarantee Switch will impress investors in future earnings reports, but is nonetheless a "notable benefit" — and the timing of the announcement ahead of Switch's May 14 earnings report was "meant to lend confidence to guidance," Synesael said. 

Price Action

Switch shares were down 0.78 percent at $15.29 at the time of publication Friday afternoon. 

Related Links:

Cowen Questions Data Center Operator Switch's 'Overall Strategy'

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

Photo courtesy of Switch. 

Latest Ratings for SWCH

DateFirmActionFromTo
Jan 2021JefferiesUpgradesHoldBuy
Oct 2020Credit SuisseMaintainsOutperform
Aug 2020CitigroupMaintainsBuy

View More Analyst Ratings for SWCH
View the Latest Analyst Ratings

 

Related Articles (SWCH)

View Comments and Join the Discussion!

Posted-In: Colby Synesael Cowen Data CenterAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga

Latest Ratings

StockFirmActionPT
PCTYJMP SecuritiesMaintains220.0
ADIBarclaysMaintains170.0
AMATBarclaysMaintains115.0
KMBRBC CapitalMaintains147.0
AZEKRBC CapitalMaintains50.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com