On Wednesday, Deutsche Bank (ETR:DBKGn) upgraded Digital Realty (NYSE:DLR) Trust stock, listed on the New York Stock Exchange under the ticker NYSE:DLR, from Hold to Buy, also raising the price target to $194 from the previous $185.
The company, currently trading at $173.89 and commanding a market capitalization of $57.68 billion, has established itself as a prominent player in the Specialized REITs industry, according to InvestingPro data. Deutsche acknowledged that the prior downgrade in August 2023 was premature and now views Digital Realty as the most preferred and widely held stock in its sector.
The upgrade comes on the heels of continued momentum for Digital Realty, driven by strong demand across artificial intelligence, hyperscale, and enterprise sectors, coupled with ongoing space and power constraints. These factors contribute to a favorable demand and pricing environment, with yields on new developments showing improvement.
The analyst highlighted the company's enhanced visibility into future growth, evidenced by over $1 billion in bookings over the last twelve months and a nearly $900 million record backlog. The company's strong market position is further reinforced by its impressive 30.83% return over the past year and a consistent track record of maintaining dividend payments for 21 consecutive years, with a current dividend yield of 2.81%.
This robust pipeline is expected to mitigate risks associated with future growth projections and presents the potential for significant improvements in cash re-leasing spreads later in the decade, especially as below-market hyperscale leases reset to rates closer to current levels.
The analyst's outlook for Digital Realty suggests that the company's mid-single-digit Core Funds From Operations (FFO) per share growth expected in 2025 could accelerate in 2026 and beyond. This projection is based on the current market conditions and the company's strong performance indicators.
Digital Realty Trust's new rating and price target reflect Deutsche Bank's confidence in the company's growth trajectory and its position within the data center and digital infrastructure industry. InvestingPro analysis indicates the stock is currently trading above its Fair Value, with additional insights available in the comprehensive Pro Research Report, which offers deep-dive analysis of this and 1,400+ other US equities.
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