Is it Wise to Retain Equinix Stock in Your Portfolio Now?

Equinix EQIX is well-poised to benefit from the robust data center demand. Its recurring revenue model and strategic expansions are encouraging. A solid balance sheet provides financial flexibility. Regular dividend payouts result in shareholder wealth creation.However, competition from other data centers, which leads to aggressive pricing policies, is a key concern for Equinix. High interest expenses add to its woes.What’s Aiding Equinix Stock?The demand for high-performing data centers will escalate in the years to come with the exponential rise in data traffic, which will require enterprises to engage data-center service providers such as Equinix. Therefore, the increasing total addressable market for data centers provides an immense growth opportunity for Equinix. Management expects total revenues to increase 3-4% in 2025 from the previous year.Equinix is likely to benefit from favorable operating leverage. Its business generates a substantial portion of monthly recurring revenue bookings (greater than 90% of total revenues in the last three years) from existing customers, contributing to its revenue growth. The company generated 36% of the recurring revenues from its 50 largest customers in 2024. We estimate recurring revenues to increase by 3% and 5.9% in 2025 and 2026, respectively, on a year-over-year basis.Equinix continues to focus on acquisitions and developments to expand its data center capacity in key markets and strengthen its competitive positioning and global reach. In February 2025, the company opened its first International Business Exchange data center in Jakarta, Indonesia, to meet the increasing digital infrastructure and connectivity needs in Southeast Asia. In November 2024, it announced its plans to establish its sixth data center in Singapore, with an initial investment of $260 million. As of Feb. 12, 2025, it had 62 major builds underway across 36 markets in 25 countries, including 16 xScale builds. This represents approximately 34,000 cabinets of retail capacity and 165 megawatts of xScale capacity, which will be delivered through to the end of 2026.Equinix’s robust balance sheet position enables it to capitalize on long-term growth opportunities. As of Dec. 31, 2024, the company’s liquidity totaled $7.5 billion. Moreover, it enjoyed investment-grade credit ratings of Baa2 from Moody’s, BBB rating from S&P Global Ratings and BBB+ from Fitch Ratings as of the end of the fourth quarter of 2024, rendering it favorable access to the debt market.Solid dividend payouts remain the biggest attraction for REIT investors, and Equinix has remained committed to that. It has increased its dividend five times in the last five years, and its five-year annualized dividend growth rate is 12.14%. Given a robust operating platform, our year-over-year growth projection of 8.7% for 2025 adjusted funds from operations and a healthy financial position, its dividend distribution is expected to be sustainable over the long run. Check Equinix’s dividend history here.What’s Hurting Equinix Stock?However, Equinix competes with data centers operated by established communications carriers and REITs. In addition to competing with neutral colocation providers, the company competes with traditional colocation providers, Internet service providers and Web-hosting facilities.Considering the strong growth potential, competition is expected to increase from existing players and the entry of new players into the space. The increased competition is likely to lead to aggressive pricing policies, making Equinix vulnerable to pricing pressure.Despite the Federal Reserve announcing rate cuts in the second half of 2024, the interest rate is still high and is a concern for Equinix. As of Dec. 31, 2024, Equinix’s total debt principal outstanding was nearly $17.61 billion. Our estimate indicates a year-over-year increase of 6% in the company’s 2025 interest expense.In the past six months, shares of this Zacks Rank #3 (Hold) company have declined 2.3% compared with the real estate market’s decline of 6.4%. Image Source: Zacks Investment Research Stocks to ConsiderSome better-ranked stocks from the broader REIT sector are Gladstone Land LAND and Cousins Properties CUZ, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.The Zacks Consensus Estimate for Gladstone’s 2025 FFO per share is pegged at 54 cents, which indicates year-over-year growth of 14.9%.The Zacks Consensus Estimate for Cousins Properties’ full-year FFO per share is $2.79, which indicates an increase of 3.7% from the year-ago period.Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Equinix, Inc. (EQIX): Free Stock Analysis Report Cousins Properties Incorporated (CUZ): Free Stock Analysis Report Gladstone Land Corporation (LAND): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks