In a world where digital transformation is paramount, Equinix EQIX continues to prove itself to be a pivotal player in the global digital infrastructure landscape. 

Analysts also seem bullish on this Zacks Rank #2 (Buy) stock. The estimate revision trend for 2024 funds from operations (FFO) per share indicates a favorable outlook for the company, with estimates moving north over the past month. 

Over the past three months, shares of Equinix have risen 11%, outperforming the real estate market’s upside of 4.6%. Given its solid fundamentals and positive estimate revisions, the stock is likely to keep performing well in the quarters ahead.

Image Source: Zacks Investment Research

What Makes Equinix a Solid Pick?

Solid Market Fundamentals and Recurring Revenues: Enterprises and service providers’ continued efforts to integrate artificial intelligence (AI) into their strategies and offerings and advance their digital transformation agendas are likely to keep demand up in the near term. Amid this, Equinix’s geographically diverse portfolio of IBX data centers is expected to benefit from enterprises’ increasing dependence on technology and the expedited implementation of digital transformation strategies.

Its business generates a substantial portion of monthly recurring revenue bookings (greater than 90% of total revenues in the last three years) from existing customers. The company generated 36% of the recurring revenues from its 50 largest customers during the three and nine months ended Sept. 30, 2024. Given the growing demand for data exchanges worldwide, Equinix is well-poised to grow its revenue base. Higher revenues, along with lower costs, will expand margins and increase profitability in the long run.

Portfolio Strength: Equinix has been achieving continued business momentum with its critical mass of customers and the resultant “network effect” within its IBX centers. Direct interconnection with its networks, connecting the majority of the world’s Internet routes, enables customers to increase the efficiency of their IT infrastructure, remove complexities associated with infrastructure administration and management and reduce costs. The benefits provided by the Platform Equinix have led to a loyal and blue-chip customer base.

Through its 268 IBX data centers in 73 metros across 34 countries, customers can connect and satisfy their critical traffic exchange requirements. These customers rely on Equinix's IBX centers for their critical interconnection relationships.

Expansion Efforts: Equinix continues focusing on acquisitions and developments to expand data center capacity in key markets and strengthen its competitive positioning and global reach. In October 2024, Equinix entered into a joint venture (JV) agreement, subject to closing conditions, in the form of a limited liability partnership with GIC and the Canada Pension Plan Investment Board (CPP Investments). The JV seeks to enhance the Equinix xScale data center portfolio, which enables hyperscale companies to expand their core deployments into their existing access point footprints at Equinix IBX data centers. 

Moreover, Equinix has an encouraging development pipeline. As of the end of the third quarter of 2024, it had 57 major builds underway across 35 markets in 22 countries, including 13 xScale builds representing more than 22,000 cabinets of retail capacity and more than 100 megawatts of xScale capacity through the end of 2025.

Balance Sheet Strength: Equinix’s robust balance sheet position enables it to capitalize on long-term growth opportunities. As of Sept. 30, 2024, the company’s liquidity totaled $7.2 billion. Moreover, it enjoyed investment-grade credit ratings of Baa2 from Moody’s, BBB rating from S&P Global Ratings and BBB+ from Fitch Ratings as of the end of the third quarter of 2024, rendering it favorable access to the debt market. 

Dividend: Solid dividend payouts remain the biggest attraction for REIT investors, and Equinix has remained committed to that. Moreover, Equinix has increased its dividend five times in the last five years, and its five-year annualized dividend growth rate is 12.02%. Given a robust operating platform, healthy financial position and a lower dividend payout (compared to its industry), its dividend distribution is expected to be sustainable over the long run.

Other Stocks to Consider

Some other top-ranked stocks from the REIT sector are Crown Castle Inc. CCI and Iron Mountain Incorporated IRM, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Crown Castle’s current-year FFO per share has been revised marginally upward over the past month to $6.98.

The Zacks Consensus Estimate for Iron Mountain’s 2024 FFO per share has moved a cent upward in the past month to $4.49.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Equinix, Inc. (EQIX) : Free Stock Analysis Report

Iron Mountain Incorporated (IRM) : Free Stock Analysis Report

Crown Castle Inc. (CCI) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research