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Barclays Capital analyst James Ratcliffe wants you to know that between the two, Equinix (EQIX) is the better data center stock than Savvis (SVVS), as he starts coverage of the two today with an Overweight rating on Equinix and an Equal Weight rating on Savvis.
Both companies should benefit from rising Internet traffic and corporate outsourcing of data center operations, with minimal pricing pressure.
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The key risk is supply glut, writes Ratcliffe, and “we do not believe that the space is in any way moving toward a similar environment” to what happened in the late ’90s, he argues. “Investment is more conservative, the industry is more consolidated, customers are real and unlikely to disappear overnight, and hosting is now critical not just to ‘online’ businesses, but also to the operations side of businesses with minimal actual online activities.”
Ratcliffe has a $100 price target on Equinix shares, and $30 for Savvis.
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