Equinix (EQIX) is proving to be a solid global player in the network-dense colocation space, reporting record bookings from cloud customers in its March quarter results and making acquisitions to expand into new geographies, says Todd Weller, Managing Director at Stifel, Nicolaus & Co., Inc.
“There’s been a lot of controversy recently around whether cloud is a positive or a negative driver for data center companies, and we think it is a positive driver, as we’ve talked about, and Equinix pointed out that they had record bookings from cloud customers in the quarter,” Weller said.
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Weller is bullish on the network-dense colocation space, because it has higher barriers of entry and is less prone to impacts from increased supply in addition to being a beneficiary of secular drivers such as mobile, cloud and social media. In this space, EQIX has expanded its global presence by making small acquisitions; however, EQIX is facing challenges as it eyes a REIT transition in 2015, Weller says.
“In the network-dense colocation space, pretty much we’ve seen Equinix make smaller tuck-in acquisitions to expand into new geographies. One of the key advantages they have is they are the only global player,” Weller said. “The fundamentals there are good, and I think valuation is attractive. I think one near-term challenge from a stock perspective is that we may be in a vacuum period in terms of who the incremental buyer of the stock is, given the company is in the midst of converting to a REIT on January 1, 2015.”
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