Digital Realty Continues to See High Demand, but Financial Performance Lags

We’re excited about Digital Realty’s transformation into a full-menu data center company with properties across the globe, the ability to meet customers' capacity needs no matter how big or small, and a greater focus on interconnection. Digital’s most recent move toward that vision is its agreement to acquire a majority stake in Teraco, a premier African data center company. Digital's bookings have consistently been accelerating, showing the value in its portfolio and overall strategy. However, continued weakness in renewal pricing and margin pressure have been headwinds to sales and profit growth. We’re maintaining our $130 fair value estimate, leaving the stock mildly overvalued, in our view.