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Hi. I am Sergey Dluzhevskiy, a portfolio manager with Gabelli Funds. Today, I will highlight Equinix, a leading global data center operator, and a top 15 holding of The Gabelli Global Content & Connectivity Fund.
The company, structured as a real estate investment trust, provides global data center services, including colocation, interconnection, and managed infrastructure. The firm operates 210 data centers, with over 22 million square feet of space and over 363 thousand interconnections, in 55 markets across 26 countries.
Equinix has 87 million shares outstanding, trading around $594 dollars per share, for $51 billion equity market cap. Net debt is about $10 billion.
We view Equinix as well-positioned both due to its defensive characteristics in the current environment impacted by COVID-19 pandemic as well as due to its long-term attractive fundamentals, as we expect the company to continue benefiting from strong global secular technology growth trends.
From defensive perspective, data centers house mission-critical IT infrastructure vital for successful continued operations of most businesses, and Equinix operates the largest, most globally distributed, and, more importantly, the most interconnected data center platform in the world. The value of its physical and virtual cross connects only increases in the current environment, as proximity to partners, customers and other networks reduces latency and network failure, improves speed and reliability. Over 90% of revenues are recurring (with customers billed monthly for the duration of their contract, generally 1 to 3 years in length). The firm has an investment grade credit rating and a lower leverage (at 3.7 times net debt to EBITDA) than broader data center group.
Long-term fundamentals are attractive, as EQIX is sitting at the intersection of technology trends fueling meaningful growth opportunities, including rising enterprise computing, data storage and interconnection needs; rapid growth in data traffic; Big Data and related analytics; cloud computing; artificial intelligence; Internet of Things. We believe that Equinix’s strong global interconnected platform and dense customer ecosystems it developed in various industry verticals will continue to serve as sources of differentiation and sustainable competitive advantage for the company.
Valuation is attractive at 19 times 2021 EBITDA and we estimate that the stock is worth north of $700 dollars per share on 2021 numbers.
