On Wednesday, Digital Realty Trust (NYSE:DLR), a $62.7 billion data center REIT currently trading near its 52-week high of $198, saw its price target raised by Mizuho (NYSE:MFG) from $170.00 to $211.00, while the firm kept its Outperform rating on the stock.
According to InvestingPro data, the stock has delivered an impressive 41.4% return year-to-date. The adjustment follows the analyst's revised forecasts for funds from operations (FFO), which are now set at $7.23 for 2025 and $7.83 for 2026. The previous estimates were $7.14 and $7.75, respectively.
The revision in FFO estimates and subsequent price target increase are attributed to an anticipated 10% revenue growth in both FY25 and FY26. This growth expectation is based on a steady occupancy gain and an average cash leasing spread of 8-10%, which surpasses prior expectations.
Additionally, Mizuho's analysis includes potential contributions from accretive external growth with stabilized yields exceeding 12%. InvestingPro analysis indicates the stock is trading at a premium to its Fair Value, with a P/E ratio of 146.3x.
The analyst utilized a 29x multiple on the projected 2026 adjusted funds from operations (AFFO) to arrive at the new price target. The increase in the price target reflects confidence in Digital Realty Trust's revenue growth and occupancy rates, as well as the impact of favorable leasing terms and strategic external growth.
Digital Realty Trust is a real estate investment trust (REIT) that specializes in data center, colocation, and interconnection solutions. The company has maintained dividend payments for 21 consecutive years, currently offering a 2.63% yield. The company's stock price is influenced by various factors, including market conditions, performance metrics, and analyst ratings and price targets.
The updated price target from Mizuho suggests a positive outlook for the company's financial performance in the coming years. For deeper insights into DLR's valuation and 12 additional ProTips, access the comprehensive Pro Research Report available on InvestingPro.
In other recent news, Digital Realty Trust has been making significant financial strides. The company issued $1.15 billion in 1.875% Exchangeable Senior Notes due in 2029, a move that aligns with their broader financial strategy. The notes, guaranteed by Digital Realty Trust, Inc., rank equally with other senior unsecured debt and are senior to any subordinated debt. The maximum number of shares initially available for issuance upon exchange of the notes is approximately 6.6 million, based on the initial exchange rate.
On the analyst front, Citi maintained a Buy rating on Digital Realty Trust and increased the price target to $212. Deutsche Bank (ETR:DBKGn), on the other hand, maintained a Hold rating but lowered its price target to $159. Mizuho reaffirmed its Outperform rating with a steady price target of $170, and RBC Capital Markets increased its price target to $207.
Digital Realty Trust's third quarter of 2024 saw new leasing volume reaching $521 million and a backlog of leases set to commence increasing to nearly $860 million. The company's Funds From Operations (FFO) of $1.67 slightly surpassed the consensus estimate of $1.66. Following these results, the company raised its guidance midpoint to $6.70, slightly above the Street's expectation of $6.66. The company's projections for 2024 include revenues at $5.58 billion, EBITDA at $2.95 billion, capital expenditures at $2.30 billion, and core FFO per share at $6.70.
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