Cautious Hold Rating on Digital Realty Amid Strong Fundamentals and High Valuation

Morgan Stanley analyst Cameron McVeigh maintained a Hold rating on Digital Realty today and set a price target of $195.00.

Cameron McVeigh has given his Hold rating due to a combination of factors impacting Digital Realty’s current and future performance. The company reported a strong third quarter with significant growth in revenue, adjusted EBITDA, and core funds from operations per share. Additionally, Digital Realty increased its full-year 2025 revenue growth guidance, reflecting optimism about its near-term prospects. However, despite these positive developments, the company’s bookings for the quarter, while substantial, fell short of previous expectations, which tempers the overall enthusiasm.
Cameron McVeigh’s rating is based on the observation that Digital Realty’s current valuation already incorporates a bullish outlook, as evidenced by its premium multiple compared to its peers in the communications infrastructure sector. This suggests that the market has already priced in much of the anticipated growth, limiting the potential for significant upside in the stock price. Therefore, while the company’s fundamentals remain strong, the Hold rating reflects a cautious stance given the current valuation levels.