Data centers — a small sub-sector among real estate investment trusts (REITs) — are less well-known than other types of REITs. Data centers own and manage data storage facilities in which their clients store information safely and securely.
Data center REITs have struggled in 2022 as have most of the other REITs. Several are down 40% or more off their highs. With data center REITs recently touching 52-week lows, analysts have been setting target prices well above the current prices. Here are three data center REITs that analysts feel have high upsides.
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DigitalBridge Group Inc. (NYSE: DBRG) is a diversified REIT that in addition to data centers also owns and operates cell towers, digital infrastructure, real estate and other businesses. DigitalBridge Group is based in Boca Raton, Florida, and was founded in 2009.
DigitalBridge Group has a 52-week range of $12.79 to $34.20, and its recent price was just below $13. On August 23, 2022, DataBridge Group completed a reverse 1-4 split that had previously been announced. In mid-September, DigitalBridge Group reinstated an annual dividend of $0.01 that was eliminated in March of 2020 when it was a much higher $0.44.
Riley Securities analyst Day recently maintained a Buy rating on DigitalBridge Group while lowering the price target from $40 to $37. This move represents a huge upside potential of 184%. But with negative earnings per share (EPS) for several consecutive years, investors are cautioned that this potential upside could take a long time to be realized.
Digital Realty Trust Inc. (NYSE: DLR) is an Austin, Texas-based data center REIT with more than 284 facilities in large metro areas across 23 different countries.
Digital Realty Trust has a 52-week price range from $96.32 to $178.22. Like most other REITs, it has recently traded near its lows. Digital Realty Trust pays an annual dividend of $4.88, which now yields 5% annual.
Analyst Luebchow of Wells Fargo recently maintained his Overweight rating on Digital Realty Trust but lowered the target price from $150 to $145. At a recent price near $97, that represents an optimistic view of 49% upside.
Digital Realty Trust has lost almost half its value since the end of December but could be a winning stock once interest rates begin to stabilize.
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Equinix Inc. (NASDAQ: EQIX) is a Redwood City, California-based data center REIT that calls itself the world’s digital infrastructure company.
The 52-week price range for Equinix is $559.53 to $853.42. It was recently about $2 above its 52-week low.
Last week, analyst Lynch of Barclays downgraded Equinix from Overweight to Equal-Weight while also slashing the price target from $822 to $674. At current levels, this represents an approximate upside of 20%.
Equinix pays a dividend of $12.40, yielding 2.2% annually. Like many REITs, it’s been in a downtrend for all of 2022. Yet Equinix has increased its revenue and EPS over the last two quarters.
With improving metrics, trading almost 35% below its 52-week high and with a 20% potential upside according to Barclays, there could be a much brighter future for this data center REIT.
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