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Why Equinix Stock Rose Nearly 12% in July

By Reuben Gregg Brewer – Aug 6, 2020 at 10:19AM

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The data center REIT hasn't skipped a beat amid the COVID-19 pandemic and investors rewarded it for the consistency.

What happened

Shares of data center real estate investment trust (REIT) Equinix (EQIX -2.65%) rose just shy of 12% in July, according to data from S&P Global Market Intelligence. In fact, despite a dip during the brief bear market earlier in the year, 2020 has been pretty good for the stock, which was up some 35% through the first seven months of the year. For comparison, the S&P 500 was only up 2% or so over that span.

So what

The big story here is COVID-19, but not in the way you might think. The worldwide effort to slow the spread of the coronavirus led to economic shutdowns and people effectively hiding in their homes. That's terrible for most businesses, but not for Equinix, which owns data centers. In fact, demand for its properties is likely to grow for years to come because of the increase in online shopping and people working from home, with even formerly in-person-only professions, like healthcare, embracing technologies that allow for remote work. 

An older man talking videoconferencing with a doctor via a laptop

Image source: Getty Images

When the company reported earnings in late July, the news was pretty good, as investors had been expecting. Second-quarter 2020 revenue increased roughly 6% over the year-ago period. Adjusted funds from operations (AFFO) rose about 8%. Furthermore, Equinix noted that it expects full-year 2020 revenue to grow 6% to 8% over 2019, with AFFO jumping between 5% and 8%. While those aren't huge numbers, they are great when you consider that COVID-19 has devastated the businesses of many other REITs.  

Now what

Equinix has a miserly dividend yield of 1.3%, so it's not a good fit for dividend-focused investors, which isn't a new thing. The REIT has long been favored by investors because of the growth prospects in the data center space. It's likely that Equinix will continue to do pretty well in the future, but much of the good news here appears to be priced into the stock.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Equinix. The Motley Fool has a disclosure policy.

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