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Why Switch Stock Soared on Friday

By Daniel Sparks – Aug 6, 2021 at 12:24PM

Key Points

  • After Switch grew its top line just 2% in Q1, its organic revenue growth is now increasing by nearly a double-digit rate.
  • The company is seeing strong demand.
  • It closed its acquisition of Data Foundry on June 7.

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The data center company is seeing accelerating growth.

What happened

Shares of data center specialist Switch (SWCH) surged on Friday after the company announced second-quarter revenue that was well ahead of the analysts' average forecast.

The stock rose as much as 26.3%, and settled to a gain of about 20% as of 11:30 a.m. EDT today.

A chart showing a stock price rising.

Image source: Getty Images.

So what

Switch posted revenue of $141.7 million, up 11.6% over the year-ago quarter and 8.3% sequentially. Some of this growth was due to a recent acquisition. Revenue grew 9% organically year over year. Analysts on average were expecting revenue of $134.5 million.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose 14.3% year over year to $79 million. The key profitability metric was up 7.5% sequentially.

"Importantly, customer installations in the first half of 2021 have paced ahead of expectations, resulting in strong backlog conversion and accelerated revenue growth," management said in the company's second-quarter earnings release.

Now what

Switch said it entered the third quarter with a record backlog. Highlighting the company's momentum, this was the third consecutive quarter with a record backlog.

Looking ahead, management said it was excited about its domestic expansion efforts with the help of its recent acquisition of Data Foundry, as well as "execution of a land purchase agreement with Dell, which will provide a tremendous platform for growth as we expand The Rock Campus in central Texas."

Daniel Sparks has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Switch Stock Quote
Switch
SWCH
Dell Technologies Stock Quote
Dell Technologies
DELL
$41.92 (-1.29%) $0.55

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