Digital Realty's Business Is Performing Well Even as Macro Concerns Bring More Fear and Risk

Digital Realty’s underlying business showed little effect from the skittish economic environment in the third quarter, and the firm’s full-year outlook was little changed. The minimal drop to the midpoints of some guidance metrics was mostly due to currency and interest rate impacts. However, the firm is preparing for a tougher environment than it has experienced in the recent past, with an assumption that capital won’t be so easily accessible. Acquisitions and speculative building may have to take a back seat, so growth opportunities may not be as prevalent in the near or medium term. We believe this rationalization of spending could be a good thing, and we are not making material changes to our model, which doesn’t build in speculative acquisitions or dispositions. We are maintaining our $133 fair value estimate and believe the stock is attractive at current levels.