Analyst Note| Matthew Dolgin, CFA |
As it often does, Equinix beat FactSet consensus revenue and EBITDA expectations in the fourth quarter (though margins were lighter than we projected). Equinix is in a class by itself in its ability to offer cloud and network connectivity on a global basis, and it is investing worldwide to press its advantage. However, while revenue grows and the firm continues to dominate in providing interconnections to enterprises, we are yet to see it pay off in cash flow. We have no doubt that Equinix’s legwork now sets itself up for a prosperous future, but the stock is pricing in a ramp in profitability of which we don’t see evidence. We plan to raise our $500 fair value estimate by $10-$15 after incorporating the quarter’s results and rolling our model to 2021, but we still see the stock as materially overvalued.