Here's Why It Is Wise to Retain Digital Realty (DLR) Stock Now

Digital Realty DLR is well poised to grow on the company’s accretive acquisitions and development efforts amid the robust demand for data centers. A solid balance-sheet position also acts as tailwind. However, with stiff competition in the industry, aggressive pricing pressure is a concern.

High growth in cloud computing, Internet of Things and big data, and an elevated demand for third-party IT infrastructure are spurring demand for data-center infrastructure. Moreover, growth in artificial intelligence, autonomous vehicle and virtual/augmented reality markets is anticipated to be robust over the next five to six years.

As infrastructure providers for this rapidly-growing digital economy, data-center landlords such as Digital Realty, Equinix, Inc. EQIX, CyrusOne Inc. CONE and CoreSite Realty Corporation COR are well placed for sustainable growth.

Particularly, Digital Realty is capitalizing on these tailwinds through its development efforts globally. Recently, its unit — Interxion — completed the third phase of the expansion of its data-centre facility in Amsterdam. Moreover, Interxion announced the expansion of its global data-center platform with the opening of a new facility to the east of Paris.

The company is well poised to benefit from its high-quality diversified customer base, comprising tenants from the cloud, content, information technology, network, other enterprise, and financial industries.

Apart from these, Digital Realty enjoys a robust balance-sheet position. The company exited second-quarter 2021 with cash and cash equivalents of $120.5 million. Its debt maturity schedule is also well laddered. In addition, the Zacks Consensus Estimate for the 2021 funds from operations (FFO) per share has moved up marginally to $6.49 over the past month.

However, the company faces stiff competition in its industry. Given the solid growth potential of the data-center real estate market, competition is expected to intensify in the upcoming period from the existing players, as well as the entry of new players. Amid the competitive landscape, aggressive pricing pressure is a concern.

Also, shares of the company have appreciated 5.6% in the past six months, underperforming the industry’s rally of 10.1%.

Image Source: Zacks Investment Research

Digital Realty currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1(Strong Buy) Rank stocks here.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.