30 Best and Worst Data Center Stocks

22. Digital Realty Trust, Inc. (NYSE:DLR)

Upside Potential: 15%

Number of hedge funds: 52

With over 310 data centers across more than 25 countries, Digital Realty Trust, Inc. (NYSE:DLR) stands as a leading provider of data center, colocation, and interconnection solutions. Its connectivity platforms, ‘PlatformDIGITAL’ and ‘ServiceFabric,’ differentiate it by enabling customers to deploy their critical infrastructure globally, manage capacity, and scale, ensuring seamless connectivity and robust performance. Size-wise, it is the 7th largest publicly traded U.S. REIT, boasting strong future leasing momentum with $1.0 billion in bookings over the last twelve months and $859 million in current backlog (i.e., lease signed but not yet commenced) as of September 2024.

Digital Realty Trust, Inc. (NYSE:DLR) possesses substantial capacity – with an existing capacity of 2,900 MWs and a land bank that could increase total capacity to 6,700 MWs. Given its global presence and scale, the company is well-positioned to benefit from secular trends in AI and hyperscale demand. Supporting this view, on January 15, a Deutsche Bank analyst upgraded Digital Realty Trust, Inc. (NYSE:DLR) to Buy from Hold, raising the price target to $194 from $185. The analyst expects the company’s core funds from operations (FFO) per share growth to accelerate in the coming years.

The analyst noted that higher funding costs due to persistently higher rates are expected to be offset by diversifying funding sources, including equity, joint ventures, and the sale of non-core assets. While premium valuation is cited as a downside risk, Digital Realty Trust, Inc. (NYSE:DLR)’s growth is projected to help it significantly outperform its peers over the long term. A week prior to Deutsche Bank, a UBS analyst also upgraded Digital Realty Trust, Inc. (NYSE:DLR) stock to Buy from Neutral and significantly increased his price target to $205 from $147 previously.