Based in Austin, Texas, Digital Realty Trust, Inc. (DLR) provides data center, colocation, and interconnection solutions. Valued at $49.47 billion by market cap, the company provides its customers in cloud and information technology services, communications and social networking, financial services, healthcare, consumer products, manufacturing, and energy with access to connected data communities through a global data center footprint of more than 300 facilities in over 50 metros across more than 25 countries on six continents. The leading REIT is expected to announce its fiscal second-quarter earnings for 2024 after the market closes on Thursday, Jul. 25.
Ahead of the event, analysts expect DLR to report an FFO of $1.62 per share on a diluted basis, down 3.6% from $1.68 per share in the year-ago quarter. The company beat or matched the consensus estimates in three of the last four quarters while missing the forecast on another occasion. During the previous quarter, DLR signed total bookings are expected to generate $252 million of annualized GAAP rental revenue, including a $40 million contribution from the 0-1 MW category and a $13 million contribution from interconnection.
For fiscal 2024, analysts expect DLR to report an FFO of $6.60, up marginally from $6.59 in fiscal 2023.
DLR stock has outperformed the S&P 500’s ($SPX) 25.6% gains over the past 52 weeks, with shares up 34.5% during this period. Similarly, it outshined the Real Estate Vanguard ETF’s (VNQ) 2% gains over the same time frame.
On Jun. 28, DLR shares closed up more than 2% after JPMorgan Chase upgraded the stock to Overweight from Neutral with a price target of $175.
DLR’s overall performance can be attributed to the growing investments in data center infrastructure, robust Q1 results, and promising full-year prospects. On May 3, DLR shares closed up more than 4% after reporting core funds of operations of $532.2 million, or $1.67 per share, beating the consensus estimates of $1.63 per share. The company’s net income was $271.3 million, or 82 cents per share. However, its revenue of $1.34 billion fell short of Wall Street estimates of $1.36 billion. DLR maintained its 2024 core FFO per share outlook between $6.60 and $6.75, the midpoint above the consensus of $6.64, and total revenue between $5.55 billion and $5.65 billion.
The world’s growing AI needs have boosted the demand for AI-ready data centers. McKinsey’s recent forecast predicts data center demand to grow at a double-digit CAGR through 2030. DLR recently announced the expansion of its NRT Campus in Japan by commencing the construction of its third data center. Upon completion in late 2025, NRT14 will raise campus capacity to up to 104 MW.
Analysts’ consensus opinion on DLR stock is bullish, with a “Moderate Buy” rating overall. Out of 23 analysts covering the stock, 14 advise a “Strong Buy” rating, one has a “Moderate Buy” rating, seven recommend a “Hold” rating, and one gives a “Strong Sell.” The average analyst price target for DLR is $154.09, indicating a 2.7% potential downside from the current levels.
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