2/23/2010-Citigroup maintained its Hold rating on Equinix but adjusted its price target lower, from $110 to $106.
Analyst Michael Rollins said, "Our study of ongoing capital spending intensity shows the potential for higher capital intensity than long-term guidance, which is dilutive to our valuation analysis. However, we believe returns for the business model remain on a solid footing and we may revisit our thesis if the share price pulls back to the $80-90 range given the support levels implied by our discretionary FCF/share analysis. Prefer Buy-rated Cogent with upside potential to FY10 consensus revenue with exposure to growth from both its enterprise & data center (net-centric) segments."
Rollins continued, "Our bottom-up analysis of capital spending coupled with our analysis of gross PP&E suggests that capital spending for the existing portfolio is likely to stay in a range between 7% and 10% of revenue over time, implying an economic useful life of 20-32 years, versus EQIX guidance of 5% or a useful life of 40 years."
The bank expects the company to report 2010 EPS of $2.07, versus consensus estimates of $2.06.
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