Published Fri, 17 Feb 2017 11:14:32 -0500 on Seeking Alpha
Digital Reality Trust (NYSE: DLR)'s 4Q 16 results and update call for analysts provided much encouragement for its investors.
It's clear that the environment remains strong with activity levels growing, and growth of 9% (and over 10% in constant dollars) in core AFFO per share registered in the year with no major changes in leverage.
Product offering expanded with a successful launch of Service Exchange in November, which simplifies and boosts available scale in interconnection between services and businesses, and was rolled out in 42 sites in eight geographies and should see 17 new sites in 2017. Management also spoke about growing Layer 3 capability, which allows customers a public cloud experience with enhanced security vs. the complexity hybrid cloud systems and risks of the public Internet. DLR bases its cloud related market outlook on expectations of $1tr of IT investment globally through 2020 due to the growth of cloud usage and - this is the key part - a tripling of Cloud infrastructure by the same date.
As with 3Q, demand continues to outgrow supply with most pricing behavior described as "rational" and vacancy rates stables in most areas (4-6% is typical). These demand dynamics and long term outlook are key attractions of the stock. The 2017 backlog stands at $68bn.
The chart below shows how new construction (measured in megawatt capacity) is concentrated in North Virginia, tying in with the high... Read more