Here's Why It is Wise to Retain Equinix (EQIX) Stock for Now

Equinix, Inc EQIX will continue to witness high demand for the inter-connected data-center space, driven by acceleration in the increasing cloud or Internet customers’ demands. To cater to the rising demand, the company is expanding its IBX data centers globally. Though expansion efforts amid this backdrop are strategic fits, such moves involve huge capital outlays. Also, intensifying competition might act as a deterrent.

Robust growth in cloud computing, Internet of Things and big data, and greater call 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. Thus, as infrastructure providers for the rapidly-growing digital economy, data-center landlords, such as Equinix, Digital Realty Trust DLR, CyrusOne Inc. CONE and CoreSite Realty Corporation COR, are well placed for sustainable growth.

Further, Equinix is capitalizing on these tailwinds by developing and acquiring data centers globally. Recently, it has opened a new IBX data center in Frankfurt. The new site, named FR8, will cater to the rising demand for private connectivity and digital infrastructure in Germany.

Moreover, the company has deployed a fully functional 5G and Edge Technology Development Center to help test and validate various 5G services and use cases. Hence, this is likely to witness high demand from mobile network operators, cloud platforms, technology vendors and enterprises that can come together at Equinix to test, demonstrate and accelerate complex the 5G and edge scenarios.

Considering the strong growth potential in the data-center market, the competition from other providers has intensified. Equinix competes with neutral colocation providers as well as traditional colocation providers, Internet service providers and web-hosting facilities. The intensifying competition is anticipated to prompt aggressive pricing policies, making Equinix vulnerable to pricing pressure.

Also, capital-intensive expansion efforts to meet the growing demand for colocation and inter-connection services are likely to increase its debt. A growing debt burden might adversely impact its results as interest expenses would go up.

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