Research

DLR – Market expectations are for Uniform ROA expansion, but management has concerns about financing, market conditions, and global expansion

  • Digital Realty Trust, Inc. (DLR:USA) currently trades at a historical high relative to UAFRS-based (Uniform) Earnings, with a 45.4x UAFRS-based P/E, implying bullish expectations for the firm. However, management has concerns about financing agreements, market conditions, and their international expansion
  • Specifically, management may be concerned about bad debt expense as a proportion of revenue, their data center green Euro bond, and softness in the European market. Furthermore, they may be exaggerating their commitment to sustainability, improvements in market conditions, and their utility to digital health channel partners. In addition, they may lack confidence in their ability to scale their platform globally, identify M&A opportunities, and maintain risk-adjusted returns. Lastly, they may be concerned about their entrance into Chile, the launch of their Tokyo campus, and about the lull in the purchasing cycle of CSPs.