Not sure if this is relevant, but I've had some exposure working with various data centers as a customer. What impresses me about EQIX is that I feel they've established such an ecosystem of loyal and locked-in customers in their facilities - not merely financial ones - that they've gotten past the point where they're a real estate business. Instead, I view them more as a cross-connect business. It costs them nearly nothing to connect 2 customers in their facility; the margins are incredible and the business is extremely sticky.
I think analysts are wrongly classifying EQIX in the same peer group as DLR/COR, which may explain its overperformance from that sector.
There's definitely smaller data center businesses that should be valued as real estate businesses. And indeed, the regional data centers I've worked with are run like real estate businesses.
For full disclosure, I do have a substantial stake in EQIX.
The following user says Thank You to artemiso for this post:
Hi Artemiso, thanks for sharing your observations. According to Wiki, EQIX is moving towards Cloud storage. Would you still invest in it today? What makes EQIX better than DLR and COR?
No, I don't think that factors into my decision at all. Their cloud storage business doesn't seem like it will hold a candle to the AWS/GCP/Azure/Backblaze market.
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Not REITs... I think the top cloud providers are usually tech companies with diversified businesses no? There are only a handful of pure cloud providers - KC (Kingsoft) is one.
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On the AWS/Cloud or even Blockchain are there companies from which you would select if considering "investment" time frames? I have no idea how to value those businesses and I'm not smart enough to separate the wheat from the chaff in earlier stage tech.
I've considered private equity, but I hate giving up all control, especially to someone that gets paid if I win or if I lose.
-Dan
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I cannot answer that question, that's a portfolio optimization decision and there's a host of unknown variables - your risk aversion level, your target variance etc.
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