Please ensure Javascript is enabled for purposes of website accessibility

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

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

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

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

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.