The price-to-AFFO (adjusted funds from operations) ratio is considered to be the best multiple for valuing REITs like Equinix (EQIX). The multiple’s implications are similar to the PE ratio.
Equinix’s TTM (trailing 12-month) price-to-AFFO ratio is 22.0x. Digital Realty (DLR), CyrusOne (CONE), and QTS Realty Trust (QTS) have TTM price-to-AFFO ratios of 19.3x, 19.9x, and 16.5x, respectively. Equinix is trading at a premium to its competitors.
Based on analysts’ 2018 AFFO expectations, Equinix is trading at a premium to its peers mentioned above. Equinix, Digital Realty, CyrusOne, and QTS Realty Trust’s forward price-to-AFFO ratios are 24.8x, 18.5x, 19.9x, and 17.3x, respectively.
Analysts are still bullish on Equinix with a “buy” recommendation. Eight out of 20 analysts recommended a “strong buy,” 14 recommended a “buy,” and two recommended a “hold.” Analysts gave a target price of $500.79 for Equinix, which indicates an 11.9% rise from its current price of $447.50.
Analysts mainly have a bullish view on Digital Realty, CyrusOne, and QTS Realty Trust with “buy” recommendations.
Five of the 20 analysts recommended a “strong buy,” seven recommended a “buy,” and eight recommended a “hold” on Digital Realty. The target price of $128.56 represents 5.8% upside from the current price of $121.54.
Out of 19 analysts covering CyrusOne stock, seven recommended a “strong buy,” ten recommended a “buy,” and two recommended a “hold.” The target price of $69.71 signifies 6.6% upside from the current market price of $65.37.
QTS Realty Trust received a “strong buy” recommendation from three out of 16 analysts covering the stock. Six analysts recommended a “buy,” while seven recommended a “hold.” With a target price of $46.43, analysts expect a rise of 4.7% from the current market price of $44.34.
Equinix accounts for ~5% of the First Trust Cloud Computing ETF (SKYY).