Watch List Ready Stock: Equinix Still In Buying Range
Source: ALAN R. ELLIOTT
Equinix (NASDAQ:EQIX) was a little known name before Oct. 6, 2010. That's the day the provider of locations to house data centers, which was quickly working its way up through the pack of fast-rising cloud computing names, lowered expectations for its pending quarter results.
The stock dropped 33% in a single session. Shares took another healthy dive 10 months later, but have since sorted themselves into a mature, stable uptrend.
The Redwood City, Calif.-based company sees most of its revenue from co-location, providing hyper-connected, redundantly powered and super-cooled data centers, into which customers pack their precious computing and network gear.
An increasing portion of that business is cloud-based, in which companies simply subscribe to the levels of data storage and computing power they need. Customers include Amazon Web Services and Microsoft (NASDAQ:MSFT).
Because the business is based on use of commercial real estate, Equinix restructured its business to a real estate investment trust, or REIT, at the beginning of this year. A REIT is a tax-advantaged structure exempt from most corporate taxes and, in return, must pass the cash flow not used to run and build the business to investors in the form of a distribution.
This explains Equinix's current dividend, which yields 2.4% annually. Its three-year Earnings Stability Factor is 25.
Small businesses were early adopters of cloud-based computing. Now Equinix's International Business Exchange (IBX) service competes to lure larger, multinational corporations.
That untapped potential has helped Equinix shares resist much of the sell-off that has plagued the general market. The stock traded tightly to Aug. 18, then sold off a mild 13%.
On Friday, it finished slightly extended, almost 6% above a 274.23 flat-base buy point.
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