Cantor Fitzgerald Starts Digital Realty Trust (DLR) at Sell; First-Mover Advantage in Asia-Pacific, But Valuation on Cloud Nine

FREE Breaking News Alerts from StreetInsider.com!

DLR Hot Sheet

Rating Summary:
2 Buy, 10 Hold, 2 Sell

Rating Trend: = Flat

Today's Overall Ratings:
Up: 16 | Down: 7 | New: 23

Cantor Fitzgerald initiates coverage on Digital Realty Trust (NYSE: DLR) with a Sell. PT $67.00.

Analyst, Sri Nagarajan, said, "DLR is currently trading at a 30.0% premium to our NAV of $55.00 per share, which is based on an 11.1% unlevered IRR assumption on stabilized properties, translating to a 7.0% cap rate. While Digital Realty is the best-in-class proven operator of data centers and has one of the highest core earnings growth among equity REITs, we believe that the implied premiums of 30.0% at current trading levels are unwarranted, compared to our assumed premiums of 22%."

"While expansion into Asia-Pacific (currently at a 3-4 times demand/supply imbalance) gives Digital Realty a distinct first-mover advantage, our observation is that the current Asia-Pacific exposure and our assumed pipeline is not enough today to move the needle on overall real estate valuation. Further, we believe that the U.S. data center market conditions (new construction, less location sensitivity, and slow decision making in the current economic environment) are not robust enough to support more than our assumed $2.5 billion development starts for Digital Realty from 2012-15."

For an analyst ratings summary and ratings history on Digital Realty Trust click here. For more ratings news on Digital Realty Trust click here.

Shares of Digital Realty Trust closed at $71.50 yesterday, with a 52 week range of $50.63-$72.39.

Discover Wall Street's best ratings calls with the pros - Upgrade to Ratings Insider Elite. Free Trial!