Digital Realty Trust could be due for solid gains moving forward as demand for data centers shows little signs of slowing, according to Deutsche Bank. The firm upgraded the data center real estate investment trust to buy from hold, and raised its price target to $194 per share from $185. That forecast implies upside of nearly 12%. Analyst Matt Niknam said momentum has swung in Digital Realty Trust’s favor, and added that the bank’s downgrade of the stock in August 2023 was “somewhat premature.” He now views the stock as the “preferred/most widely held name among the group.” “With robust demand (AI/hyperscale/ enterprise) and space/power constraints that are unlikely to moderate any time soon creating a highly favorable demand and pricing backdrop (with yields on new developments that continue to improve),” Niknam said. The analyst also highlighted the company’s efforts to decrease its debt load, and noted Digital Realty Trust has multiple avenues of funding at its disposal at better rates compared to previous leverage. “Since the start of 2023, DLR has reduced leverage by over 2x, to ~5x as of 2024YE. Despite the headwind from “higher-for-longer” interest rates, we’d note DLR’s success in successfully tapping into multiple funding sources including debt …, equity, development JV’s, and sales of non-core assets,” he said. Digital Realty Trust is coming off a strong year, rising 31.8% in 2024. That tops the S & P 500’s 23% advance for the year. DLR 1Y mountain Digital Realty Trust stock. Analyst sentiment is mostly bullish on the stock. Of the 26 who cover it, 16 rate the company as a buy or strong buy, per LSEG. The remaining 10 analysts have a hold or underperform rating. The average analyst price target implies upside of 7%.
