Digital Realty (DLR) AI Stock Analysis

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Digital Realty

(NYSE:DLR)

75Outperform

Digital Realty's overall score reflects its strong financial health, strategic earnings call guidance, and proactive management of financial obligations through corporate events. Despite technical indicators showing bearish trends and a high P/E ratio suggesting overvaluation, the company's robust liquidity, innovation, and market demand position it for continued growth in the REIT sector.

Positive Factors

Financial Performance

DLR posted $76B in the <1 MW category, a new record high for the company, partially driven by higher-density deployments, such as AI.

Revenue Growth

An expected 8.0% organic revenue growth is projected to more than offset the effect of non-core asset dispositions.

Negative Factors

Guidance

Guidance for FY2025 was slightly below estimates/consensus, largely due to FX headwinds.

Valuation Concerns

Despite a positive operating environment, there is caution due to the premium valuation of the company, which is coupled with lower growth and returns compared to peers.

Digital Realty (DLR) vs. S&P 500 (SPY)

Market Cap

$46.01B

Dividend Yield3.58%

Average Volume (3M)2.81M

Price to Earnings (P/E)84.7

Beta (1Y)0.88

Revenue Growth1.42%

EPS Growth-42.07%

CountryUS

Employees3,936

SectorReal Estate

Sector Strength86

IndustryREIT - Office

Share Statistics

EPS (TTM)1.63

Shares Outstanding336,748,720

10 Day Avg. Volume3,081,536

30 Day Avg. Volume2,812,630

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)9.25

Price to Cash Flow (P/CF)16.50

P/FCF Ratio0.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$183.88

Price Target Upside26.14% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering18

Digital Realty Business Overview & Revenue Model

Company DescriptionDigital Realty supports the world's leading enterprises and service providers by delivering the full spectrum of data center, colocation and interconnection solutions. PlatformDIGITALR, the company's global data center platform, provides customers a trusted foundation and proven Pervasive Datacenter Architecture PDxTM solution methodology for scaling digital business and efficiently managing data gravity challenges. Digital Realty's global data center footprint gives customers access to the connected communities that matter to them with more than 284 facilities in 48 metros across 23 countries on six continents.

How the Company Makes MoneyDigital Realty makes money primarily through leasing colocation and data center space to enterprises and service providers. This includes long-term leases for wholesale data center space as well as retail colocation services. The company also generates revenue from interconnection services, which enable customers to connect directly with each other and to various networks and cloud service providers. Moreover, Digital Realty benefits from offering additional managed services and support, which enhance its value proposition and provide incremental revenue. Key partnerships with telecommunications carriers and cloud service providers further enhance their service offerings and drive customer growth. These diverse revenue streams allow Digital Realty to maintain a stable and recurring income base, supported by the growing demand for data storage and processing capabilities worldwide.

Digital Realty Financial Statement Overview

Summary

Digital Realty demonstrates strong financial health with consistent revenue growth, operational efficiency, and a solid balance sheet with no debt. The firm's ability to generate operating cash flow is impressive, yet the fluctuation in net profit margins and historical volatility in free cash flow growth suggests room for improvement in profitability management and cash stability. Overall, the company is well-positioned in the REIT sector with a stable financial foundation.

Income Statement

Very Positive

Digital Realty shows a strong gross profit margin consistently around 100% due to its business model as a REIT. The company has demonstrated steady revenue growth over the years, with a 1.4% increase from 2023 to 2024. EBIT and EBITDA margins also reflect healthy operational efficiency, though the net profit margin has fluctuated, decreasing from 17.32% in 2023 to 10.85% in 2024. This decline indicates potential pressures on net profitability despite revenue growth.

Balance Sheet

Very Positive

Digital Realty's balance sheet is robust with a debt-to-equity ratio of 0 in 2024, indicating no debt, which is exceptional for a REIT. The equity ratio has improved to 47.12% in 2024 from 43.32% in 2023, showing a strong equity base. The return on equity, however, decreased from 4.96% in 2023 to 2.82% in 2024, suggesting reduced profitability relative to equity, but the overall financial stability remains solid.

Cash Flow

Positive

The cash flow statement exhibits a positive trend in operating cash flow and free cash flow, which increased significantly from 2023 to 2024. The operating cash flow to net income ratio is strong at 3.75 in 2024, indicating efficient cash generation. However, free cash flow growth has been volatile in past years, which presents a risk to sustained liquidity improvements.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
5.55B	5.48B	4.69B	4.43B	3.90B
	Gross Profit
5.55B	2.88B	2.69B	2.67B	2.40B
	EBIT
471.86M	524.46M	589.97M	694.01M	557.53M
	EBITDA
1.87B	3.16B	2.24B	2.25B	2.04B
	Net Income Common Stockholders
602.49M	948.84M	377.68M	1.71B	356.40M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
3.87B	1.63B	141.77M	142.70M	108.50M
	Total Assets
45.28B	44.11B	41.48B	36.37B	36.08B
	Total Debt
18.01B	18.97B	18.07B	14.96B	14.77B
	Net Debt
14.14B	17.34B	17.93B	14.82B	14.66B
	Total Liabilities
22.11B	23.12B	21.86B	17.85B	17.59B
	Stockholders Equity
21.34B	19.12B	17.58B	18.00B	17.72B
Cash Flow		Free Cash Flow
2.26B	1.63B	-983.71M	-818.54M	-472.14M
	Operating Cash Flow
2.26B	1.63B	1.66B	1.70B	1.71B
	Investing Cash Flow
-1.91B	-1.12B	-4.70B	-1.06B	-2.60B
	Financing Cash Flow
2.06B	963.47M	2.97B	-590.63M	935.69M

Digital Realty Technical Analysis

Technical Analysis Sentiment

Negative

Last Price145.77

Price Trends

50DMA

154.02

Negative

100DMA

167.19

Negative

200DMA

161.09

Negative

Market Momentum

MACD

-3.50

Negative

RSI

42.52

Neutral

STOCH

26.68

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DLR, the sentiment is Negative. The current price of 145.77 is below the 20-day moving average (MA) of 146.26, below the 50-day MA of 154.02, and below the 200-day MA of 161.09, indicating a bearish trend. The MACD of -3.50 indicates Negative momentum. The RSI at 42.52 is Neutral, neither overbought nor oversold. The STOCH value of 26.68 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for DLR.

Digital Realty Risk Analysis

Digital Realty disclosed 10 risk factors in its most recent earnings report. Digital Realty reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Digital Realty Peers Comparison

Overall Rating

UnderperformOutperform

Sector (61)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
DLR	75 Outperform	$46.01B	84.74	2.98%	3.58%	1.42%	-42.07%
SBAC	73 Outperform	$23.08B	30.92	-14.67%	1.94%	-1.18%	50.21%
EQIX	71 Outperform	$72.78B	87.92	6.27%	2.36%	6.84%	-17.14%
Sector *	61 Neutral	$4.31B	16.14	-3.60%	11.88%	6.17%	-20.99%
DBRG	61 Neutral	$1.33B	103.62	6.48%	0.56%	-59.60%	-93.25%
IRM	56 Neutral	$22.77B	127.47	-35.81%	3.72%	12.22%	-2.68%
CCI	55 Neutral	$42.76B	33.81	-124.94%	6.60%	-5.92%	-359.56%

* Real Estate Sector Average

Performance Comparison

DLR

Digital Realty

145.77

8.65

6.31%

DBRG

DigitalBridge Group

7.97

-10.13

-55.97%

CCI

Crown Castle

95.54

3.68

4.01%

EQIX

Equinix

797.43

37.15

4.89%

IRM

Iron Mountain

84.49

10.97

14.92%

SBAC

SBA Communications

212.14

11.62

5.79%

Digital Realty Earnings Call Summary

Earnings Call Date: Feb 13, 2025 | % Change Since: -10.81% | Next Earnings Date: Apr 24, 2025

Earnings Call Sentiment Positive

Digital Realty had a strong year in 2024, driven by record leasing and revenue growth, successful capital management, and continued innovation. However, challenges remain with lumpy demand in certain segments and supply chain constraints.

Highlights

Record Leasing and Revenue Growth

Achieved a record $1 billion in total leasing for 2024, with significant contributions from the 0 to 1 megawatt plus interconnection segment. Core FFO per share grew by 6% in the fourth quarter, indicating strong financial performance.

Increased Liquidity and Reduced Leverage

Raised over $2 billion in new debt and equity, plus $500 million from asset sales, boosting liquidity to over $6 billion and reducing leverage to 4.8 times at year-end.

Expansion and Innovation in Services

Expanded global portfolio capacity by over 200 megawatts and development pipeline by over 75%. Introduced new products like high-density Colo 2.0 and private AI Exchange.

Strong Global Demand and Customer Growth

Added nearly 600 new logos in 2024, with strong leasing activity in both the Americas and EMEA. Record leasing activity in EMEA and Americas indicates robust demand.

Commitment to ESG and Sustainability

Started construction on a 120-megawatt solar power plant in South Africa and signed community solar agreements in Chicago, supporting 100% renewable energy goals.

Lowlights

Lumpy Demand in Greater than 1 Megawatt Segment

Demand for larger capacity blocks remains inconsistent, with significant deals occurring sporadically, affecting predictability in this segment.

Short-term Headwinds from Capital Recycling

Activities aimed at improving long-term growth have resulted in short-term headwinds, impacting immediate financial results.

Supply Chain and Power Constraints

Supply chain issues and power delivery remain tight, potentially impacting the ability to meet rising demand efficiently.

Company Guidance

During Digital Realty's fourth-quarter 2024 earnings call, the company provided robust guidance for the upcoming fiscal year. They reported a second consecutive quarter of record leasing in the 0 to 1 megawatt plus interconnection segment, contributing to a total of $1 billion in leasing for the year. They also highlighted their financial strategy, which included raising over $2 billion in new debt and equity capital, and securing over $500 million from asset sales and joint venture contributions, enhancing their liquidity to over $6 billion and reducing leverage to 4.8 times. Additionally, Digital Realty achieved a 6% growth in core FFO per share in the fourth quarter. Looking forward to 2025, they are guiding for core FFO growth of 5.7% year-over-year, supported by more than 10% growth in total revenue and adjusted EBITDA, with same capital cash NOI expected to grow 3.5% to 4.5%. The company remains focused on capital recycling, innovation, and meeting the growing demand for data center capacity driven by AI, cloud, and digital transformation initiatives.

Digital Realty Corporate Events

Financial Disclosures

Digital Realty Reports Q4 2024 Financial Results

Neutral

Feb 13, 2025

On February 13, 2025, Digital Realty announced its financial results for the quarter ending December 31, 2024, via a press release. This announcement, which included supplemental information available on the company’s website, highlighted the company’s ongoing operations and provided insights into its financial standing, which are critical for stakeholders and investors looking to understand Digital Realty’s market position and future outlook.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.