Digital Realty Belief (NYSE:DLR) inventory has dropped 1.6% in Friday premarket buying and selling and Equinix (NASDAQ:EQIX) shares have slipped 1.5% after Barclays analyst Brendan Lynch downgraded each of the information heart REITs.
Digital Realty (DLR) was reduce to Underweight from Equal Weight as its falling natural metrics and weak return on invested capital “replicate asset obsolescence and costly acquisitions, in our view,” Lynch wrote in a notice to purchasers.
“The $5.5B growth pipeline will help DLR reorient its portfolio in the direction of newer, extra environment friendly belongings, however legacy belongings look like a drag on efficiency,” he stated. Moreover, restricted choices for asset disposals may end in tight liquidity in H2 2022 and 2023.
Observe that earlier this week, SA’s Quant system flagged Digital Realty (DLR) for a excessive threat of performing poorly resulting from adverse earnings revisions and decelerating momentum. Lynch’s Underweight ranking clashes with the common Wall Avenue ranking of Purchase and the common SA Creator’s ranking.
In the meantime, Lynch downgraded Equinix (EQIX) to Equal Weight from Obese as rising power costs, accounting practices, and evolving cloud choices, amongst different elements, may suppress its earnings trajectory. Lynch lowers his 2023 adjusted FFO per share estimate to $30.63 from his earlier estimate of $31.63.
See why SA contributor On the Pulse sees important long-term dividend development potential for Digital Realty (DLR).