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Why Digital Realty Trust Stock Gained 16% in March While the Market Plunged

By Beth McKenna – Updated Apr 7, 2020 at 10:17AM

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Shares of the data center REIT have been bucking the coronavirus-driven market sell-off.

What happened

Shares of Digital Realty Trust (DLR -2.54%), a data center real estate investment trust (REIT), rose 15.7% (or 16.6% if we include dividends) in March, according to data from S&P Global Market Intelligence

For context, the S&P 500 index returned negative 12.4% last month. That poor performance was due to a continuation of the coronavirus-driven market sell-off that began in mid-February.

So far this month, through April 6, Digital Realty Trust's return is nearly flat, while the broader market has returned 1.5%. In 2020, shares have returned 17.3%, far outpacing the S&P 500's negative 17.1% return. 

Interior of a data center lit with blue light.

Image source: Getty Images.

So what

Digital Realty Trust made a notable positive announcement last month: that it completed its acquisition of the Netherlands-based InterXion, which brings European co-location and interconnection expertise to the table. Following the March 13 announcement, Digital Realty's shares popped 11.7%. However, the S&P 500 surged 9.3% on this day, so the market's strength was likely the primary catalyst behind the stock's gain. 

Like the market, Digital Realty stock seesawed last month. The main reason the tech stock outperformed the market was probably because investors are optimistic that the company won't be negatively affected by the pandemic and could even see an increase in business. This view is based on the fact that most of the U.S. population and much of the world population are living under some form of a lockdown order to help slow the spread of COVID-19. So internet usage is surging, as people do things like stream more movies and communicate virtually with colleagues.

Now what 

For the first quarter of 2020, Wall Street is expecting Digital Realty Trust to post adjusted earnings per share of $0.28 on revenue of $779.5 million. This represents year-over-year declines of 39% and nearly 3%, respectively.

Analysts' longer-term view is more positive. The consensus estimate is for EPS growth averaging 16.7% over the next five years.

Beth McKenna has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Digital Realty Trust. The Motley Fool has a disclosure policy.

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Digital Realty Trust Stock Quote
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DLR
$99.61 (-2.54%) $-2.60

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