Equinix Valuation Clash: Bullish Article Faces Cautious DeepValue Report

What happened

A Seeking Alpha article advocates switching from Digital Realty to Equinix, citing superior AFFO/share growth, a cross-connect ecosystem driving NOI, and a valuation of 18.4x forward AFFO as a rare opportunity. However, the DeepValue master report maintains a HOLD rating, noting Equinix's stretched valuation with a P/E of ~77 and EV/EBITDA of ~193, alongside high leverage at Net Debt/EBITDA of 4.6x. The report highlights significant risks, including capex intensity, power procurement challenges, and FCF volatility, which temper the growth narrative. Despite Equinix's strong moat and plans to double capacity by 2029, the report emphasizes limited margin of safety with a DCF anchor of $45.43 per share, suggesting current prices may not justify the risks. Investors must critically assess whether the article's optimism overlooks these fundamental concerns in favor of promotional messaging.

Implication

The article's bullish take may underplay the substantial valuation and leverage issues detailed in the DeepValue report, which could cap near-term upside. Equinix's expansion into AI and hybrid cloud is promising, but execution risks in power procurement and project delivery could hinder growth and increase costs. High valuation metrics like P/E and EV/EBITDA suggest the stock is expensive, requiring careful entry timing for adequate risk-adjusted returns. Monitoring key items from the report—such as AFFO growth, leverage trends, and power delivery—is crucial to gauge any improvement or deterioration. Ultimately, while Equinix has a robust strategic position, current levels lack sufficient downside protection, reinforcing a cautious, wait-and-see approach.

Thesis delta

The article does not shift the core thesis from the DeepValue report, which remains a HOLD due to valuation concerns and unmitigated risks. It reiterates growth prospects but fails to address critical issues like leverage and power procurement, offering no new evidence to upgrade the investment case. However, if the claimed multiple compression is validated, it could signal a potential entry point, but this requires independent verification against the report's stringent valuation metrics.