For Aggressive Investors:
Equinix, Inc. |  - Co. Spotlights available via RSS feed
| Tripled In One Year
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This column is for investors willing to take more risk and potentially receive more reward. The stocks mentioned in this column are not recommended to buy or sell. They're brought to your attention so you can investigate them further to determine if they fit your risk profile. Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings. And some will have tremendous stories. | | EQIX | $98 | Why It's Featured: Strong growth in revenues and earnings.
Danger Zones: Stock reflects a lot of the good. | Forward P/E | 47 | | Earn. Growth | 25% | | Projected Sales Growth | 22% | | Market Cap. | $3.81B |
October 2, 2008 - Equinix, Inc. (EQIX-NASDAQ) provides colocation, interconnection, and managed IT infrastructure services in the United States, Asia-Pacific, and Europe. Its colocation products and services include cabinets; power, including AC and DC power circuits; and IBXflex, a service that allows customers to deploy mission-critical operations personnel and equipment on-site at its IBX centers.
The company's interconnection services comprise physical cross-connect/direct interconnections, which enables customers directly and privately to connect to another IBX customer; EquinixExchange that allows customers to connect to and peer through EquinixExchange via a central switching fabric; Equinix IBXLink, which enables customers to interconnect between IBX centers at various capacities;and Internet connectivity services.
Its managed IT infrastructure services include professional services, such as installation and cabling; Smart Hands services, which gives customers access to its IBX staff for various tasks, including equipment rebooting, power cycling, card swapping, and performing emergency equipment replacement; and Equinix Direct, a managed multi-homing service that allows customers to manage multiple network connections over a single interface.
Equinix markets through direct sales force and channel marketing program to carriers, bandwidth providers, content providers, financial companies, and enterprises. The company was founded in 1998 and is based in Foster City, California.
Two things caught my attention about EQIX: the first was the price chart. The stock rocketed to $121.10 by the end of 2007, up from a low of $2.00 in 2003. Then it fell apart for a year, finally bottoming at $32.70 in late 2008. From there it foundered until March of 2009 where it reached $41.40. Then it took off and has been on a straight upward path for the last 12 months, reaching $109.20 before backing off recently to its current level of $98 a share.
The second thing I noticed: earnings. They've exploded. The company showed a deficit of 22 cents in 2006, then another deficit of 16 cents the next year. In 2008, they were positive 74 cents a share. For 2009, consensus among 23 analysts who follow the company is for $1.66 (up 124%). Next year, they see $2.09, another 26% improvement. There's a reason the stock has rebounded so nicely. But can it keep up the trajectory?
The company is expanding, trying to meet ever increasing demand for data-center services. Two new data centers will open soon, one in Washington, D.C., the other in Silicon Valley. Both are part of the $1.4 billion expansion plan started in 2007 for 15 of the company's 18 markets it currently serves. Management is also acquiring other companies to help expedite growth.
Earnings weren't the only thing growing. Revenues jumped as well. In 2006, they were $287 million. In 2009, analysts believe the year will finish with $878 million. Next year, they see $1.07 billion. The reason for the great improvement: corporations need more and more server and router capacity. Not just in the U.S. but globally, particularly in China and Europe.
In the second quarter of this year, look for final details on the company buying Switch and Data Facilities. Numbers should be close to $690 million in a combination of cash and stock. That would add 34 data centers in 22 markets in the U.S. and Canada, specifically in Atlanta, Denver, Miami, Seattle and Toronto. That would put the company in 79 data centers in 34 markets.
More numbers: Price to sales is 4.66. Price to book is 3.41. Book value is $29.10. Operating margin in the last 12 months was 18.37% while Profit margin was 20.85%. Return on equity was 17.57%. There is $609.38 million in cash for $15.63 a share. Total debt is $1.51 billion or about 56% of capital. Current ratio is 2.55. Beta was 1.68 for the last 12 months. There are 38.98 million shares outstanding with a float of 38.46 million. Insiders own 16.39% and Institutions own 100% of the float. There is no dividend.
Investors love this stock. Just look at the valuations. They truly believe this is one of the companies that will continue to grow well above average, with no impediments. There's no question demand for routers and servers is high and will see increases. The same is true for data-center facilities with computers connecting to high-speed communcations networks, demanded by e-commerce services over the Internet. The question is whether all that goodness is already baked into the stock's price. It seems with a P/E close to 50 that earnings will have to have a large surprise on the upside to see higher levels for the stock. But if the stock falls off, it's a good one to have on the radar screen to pick up at better prices.
- Company Web site: www.equinix.com - Ted Allrich |
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