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Digital Realty Trust (NYSE:DLR) and Equinix (NASDAQ:EQIX) perked up 2.8% and 2.7%, respectively, in Thursday morning trading as Mizuho analyst Vikram Malhotra started coverage of the REITs with Outperform ratings on the view that “solid fundamentals for data centers are set to get even better.”
But the recent performance of the two stocks have been mixed so far this year, with EQIX slipping 1% and DLR climbing 18%.
Malhotra attributed EQIX’s relative weakness to concerns about limited AI benefits in the near-term, given its focus on small tenants. DLR, meantime, has been buoyed in part by “its hyperscale focus making it a real time beneficiary from AI.”
“Looking forward we see pricing power as an underappreciated earnings driver, and benefiting the REITs in different ways,” the note said.
At its current valuation, the analyst believes that EQIX’s “ability to achieve consistent revenue growth and AI benefits are underappreciated.” For DLR, “we see a new path to high single-digit earnings growth sustaining elevated multiples after several years of disappointing results.”
Seeking Alpha’s Peer tab compares numerous metrics of the aforementioned REITs.