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Equinix Inc EQIX

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Equinix Puts Up Its Usual Solid Results in Q4 and Pushes Its Market Advantage, but It’s Expensive

Matthew Dolgin, CFA Equity Analyst

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.

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Company Profile

Business Description

Equinix is a retail provider of data centers, enabling hundreds of enterprise tenants to house their servers and networking equipment in a colocated environment. Tenants can then connect with each other, cloud service providers, and telecom networks. Equinix operates 227 data centers in 63 markets worldwide and owns just less than half of them. The firm has nearly 10,000 customers, including 1,800 networks, that are dispersed over five verticals: Cloud and IT Services, Content Providers, Network and Mobile Services, Financial Services, and Enterprise. About 70% of Equinix's revenue comes from renting space to tenants and related services, and more than 15% comes from connecting customers with each other. Equinix operates as a real estate investment trust.

One Lagoon Drive
Redwood City, CA, 94065
T +1 650 598-6000
Sector Real Estate
Industry REIT - Specialty
Most Recent Earnings Dec 31, 2020
Fiscal Year End Dec 31, 2020
Stock Type Hard Assets
Employees 10,013