Equinix (EQIX) Expands in Europe with 6th IBX in Frankfurt

Global data center service provider, Equinix Inc. EQIX, announced that it has opened the sixth International Business Exchange (IBX) data center – FR6 – in Frankfurt, Germany. The new center will enable the company to meet growing demand for data center services in the region.

Notably, the sixth data center is located at Equinix’s Campus Kleyer. In the first phase, the company has invested $92 million and added 1,325 cabinets, covering an area of 72,000 gross square feet. This enables the company to proceed aggressively with its plan of developing data centers across different geographies.

Per Equinix, with over 300 networks and carriers from more than 70 countries, Frankfurt is the most interconnected hub in the entire Europe, making the Campus Kleyer facility the most network-rich location for the company. Therefore, expanding its facility in the city will attract more enterprises to opt for Equinix’s data center services, thereby boosting its revenues.

The recent expansion plan is in sync with the company’s $1 billion investment plan announced in Apr 2017. According to the plan, Equinix has declared to unveil five IBX data centers in Sao Paulo, Frankfurt, Amsterdam, Silicon Valley and Washington D.C., this year. Apart from this, the company intends to make expansion at 14 of its existing data centers.

Expansion in important markets and consolidation of facilities in existing ones have been an important part of Equinix's core strategy. The company consistently strives to boost its revenue base as well as profitability, by offering upgraded technology to clients. Moreover, the recurring revenue model has provided the much-needed support to the company's revenue stream over the years. The company's cloud and IT service businesses are its fastest growing segments, and account for roughly one fourth of the total revenue.

Further, Equinix remains positive on the growing demand for data centers. To meet the rising demand for cloud services, this global interconnection and data center company is expanding its IBX data centers globally, and gaining popularity among tech companies looking for data management. Thus, the company projects its total addressable market for retail data centers to increase at a CAGR of 8% from 2013 to 2017, and reach $24.0 billion. Based on this, Equinix projects revenue growth rate of 10% through 2017.

Thus, we believe that by expanding its data center assets, Equinix will be in a better position to capitalize on this opportunity. Furthermore, this expansion will help the company to fortify its global footprint and bring in additional revenues.

Shares of Equinix have been steadily trading higher on a year-to-date basis. The stock generated a return of approximately 17.9%, while the Zacks REIT-Equity Trust industry incurred a loss of 5.3% during the same time frame.

Currently, Equinix carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Applied Optoelectronics Inc. AAOI, Broadcom Ltd. AVGO and FormFactor Inc. FORM. Applied Optoelectronics and Broadcom, both sport a Zacks Rank #1 (Strong Buy), while FormFactor carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Applied Optoelectronics, Broadcom and FormFactor have expected long-term earnings per share growth rates of 20%, 13.6% and 16%, respectively.

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