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Equinix (EQIX) PT Lifted To $182 By RBC Capital On Higher Out-Year Cash Flow Forecast, 'Outperform' Maintained

 May 01, 2012 12:30 PM

(By Balaseshan) RBC Capital Markets analyst Jonathan Atkin increased his price target on shares of Equinix Inc. (NASDAQ:EQIX) to $182 from $141 on higher out-year cash flow projections driven by top-line growth and margin expansion, while maintaining "Outperform" rating.

EQIX reported better-than-expected revenues and adjusted EBITDA. Revenues were $452.2 million (Atkin's estimate at $446 million) with recurring revenues of $429.6 million; Foreign exchange headwinds were $500,000.

Adjusted EBITDA of $215.2 million beat the analyst's estimate of $205.4 million partly due to one-off gross margin benefits in the quarter; normalized adjusted EBITDA would have been $211.5 million, up 26.4% year-over-year. Capex was $145 million (his estimate of $200 million) with ongoing/expansion capex of $43.1 million/$102.4 million.

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MRR churn was 2.4%, up 40 basis points sequential, partly due to a UK customer downsizing its footprint. EQIX receive a $2.8 million termination fee and has already been able to resell portion of the reclaimed space at a higher rate. Americas added 1,000 billable cabinets while EMEA/APAC added 500/200.

Average revenues per billable cabinet in the quarter were $2,169, $1,229 and $1,928 for Americas, EMEA and APAC, respectively. The utilization rate remained flat at 83% for Americas and ticked up 100 basis points for EMEA/APAC to 79%/65%. The 59% of EQIX's MRR comes from customers who are deployed in multiple geographical regions.

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Management provided no material update and plans to reach a decision by year-end. Equinix' NOLs of $450 million should shield the company from meaningful taxes through 2014. The analyst believes a REIT conversion prior to that time is more likely than not.

Atkin's estimated 2012 consolidated revenues are $1.9 billion (previous: $1.89 billion) with recurring and  non-recurring contributions of $1.81 billion and $90.3 million, respectively. He estimates colocation revenues will account for 75.5% of 2012 consolidated revenues and interconnect/managed infrastructure will account for 14.9%/4.7%.

The brokerage raised its 2012 EBITDA estimate to $882 million from $868.2 million and its 2013 estimate to $1.062 billion from $1.025 billion. The firm also lifted its 2012 capex estimate to $775.5 million from $765 million with ongoing/expansion capex of $138.1 million/$637.4 million.

Equinix connects businesses with partners and customers worldwide through a global platform of data centers. Platform Equinix connects more than 4,000 enterprises, cloud, digital content and financial companies, including more than 690 network service providers.

EQIX is trading up 0.48% at $164.98 on Tuesday.



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