Lukewarm Financial Results Obscure a Great First Quarter for Digital Realty; FVE Increases to $133

Digital Realty’s first-quarter results were sufficient to keep the firm on pace for its full-year guidance, which it reiterated across all major metrics, but there was noise related to currency headwinds, pass-through power costs, and asset dispositions. However, underneath Digital put up another fantastic quarter of bookings and saw renewal pricing turn a corner after being under pressure for the past several years. We believe the transformation Digital has made with its data center portfolio over the last five years, becoming much more network dense and global, will keep this momentum going. While our new fair value estimate of $133, up $3, implies the stock is modestly overvalued, we think it’s the most compelling firm in the data center sector.