Jefferies has increased its price target for Digital Realty (DLR, Financial), moving it up to $193 from $190, while maintaining a Buy rating on the company's shares. This adjustment comes in response to Digital Realty's robust leasing performance in the latest quarter, which defies broader industry concerns regarding reduced investments by hyperscalers.
The firm's analysis highlights that, although Microsoft (MSFT) has shown signs of reducing its commitments to data centers, this trend is not indicative of the entire sector. Digital Realty's strong leasing results demonstrate resilience and suggest that opportunities in the data center market remain robust for certain players, particularly for DLR.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 21 analysts, the average target price for Digital Realty Trust Inc (DLR, Financial) is $184.14 with a high estimate of $220.00 and a low estimate of $129.00. The average target implies an upside of 14.97% from the current price of $160.17. More detailed estimate data can be found on the Digital Realty Trust Inc (DLR) Forecast page.
Based on the consensus recommendation from 25 brokerage firms, Digital Realty Trust Inc's (DLR, Financial) average brokerage recommendation is currently 2.1, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Digital Realty Trust Inc (DLR, Financial) in one year is $142.44, suggesting a downside of 11.07% from the current price of $160.17. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Digital Realty Trust Inc (DLR) Summary page.
DLR Key Business Developments
Release Date: February 13, 2025
- Total Leasing Completed in 2024: $1 billion.
- New Debt and Equity Capital Raised in Q4: Over $2 billion.
- Net Proceeds from Asset Sales and JV Contributions: Over $500 million.
- Liquidity at Year-End: Over $6 billion.
- Leverage at Year-End: 4.8 times.
- Core FFO Per Share Growth in Q4: 6%.
- New Leases Signed in Q4: $100 million.
- 0-1 Megawatt Plus Interconnection Bookings in Q4: $76 million (16% sequential uplift).
- Lease Renewal Activity in 2024: Approached $1 billion with cash rents rolling up 9% on average.
- New Logos Added in 2024: Nearly 600.
- Capacity Expansion in 2024: Over 200 megawatts.
- Development Pipeline: Over $7 billion of projects underway, 70% pre-leased.
- Backlog of Booked but Not Yet Billed Leases at Year-End: Roughly $800 million.
- Core FFO in Q4: $1.73 per share (up 6.1% year-over-year).
- Data Center Revenue Growth in Q4: 8% year-over-year.
- Adjusted EBITDA Growth in Q4: 7.4% year-over-year.
- Same Capital Cash NOI Growth in Q4: 1.4% year-over-year.
- Development CapEx in 2024: Approximately $3 billion on a gross basis.
- Net Debt-to-Adjusted-EBITDA Ratio at Year-End: 4.8 times.
- Core FFO Guidance for 2025: $7.05 to $7.15 per share.
- Expected Total Revenue and Adjusted EBITDA Growth in 2025: More than 10% on a normalized and constant currency basis.
- Expected Same Capital Cash NOI Growth in 2025: 3.5% to 4.5% on a constant currency basis.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Digital Realty Trust Inc (DLR, Financial) achieved a record $1 billion in total leasing for 2024, with significant contributions from the 0-1 megawatt plus interconnection segment.
- The company raised over $2 billion in new debt and equity capital, boosting liquidity to over $6 billion and reducing leverage to 4.8 times by year-end.
- Digital Realty Trust Inc (DLR) reported a 6% growth in core FFO per share in the fourth quarter, indicating strong financial performance.
- The company expanded its development pipeline by over 75% to $7 billion, with 70% of projects pre-leased, ensuring future growth.
- Digital Realty Trust Inc (DLR) made significant progress in ESG initiatives, including the construction of a 120-megawatt solar power plant in South Africa and community solar agreements in Chicago.
Negative Points
- Greater-than-a-megawatt bookings dipped sequentially, indicating potential volatility in larger capacity block demand.
- The company faces challenges in maintaining consistent cash renewal spreads, with a forecast of 4% to 6% for 2025, down from 9% in 2024.
- Supply chain constraints, particularly in power delivery, remain a concern, potentially impacting project timelines and costs.
- The company's reliance on capital recycling and joint ventures for funding may introduce variability in financial outcomes.
- Despite strong leasing activity, the lumpiness in bookings, especially in larger capacity blocks, could lead to uneven revenue recognition.
