Digital Realty Trust, Inc. DLR experienced a significant downturn in its shares following the release of its fourth-quarter financial results, accompanied by an FY24 guidance that fell below market estimates.
The reported revenue of $1.369 billion, while reflecting an 11% year-on-year increase, unfortunately missed the market consensus of $1.394 billion, which sent ripples of concern through the investment community.
Adjusted EBITDA, which rose 9% year-on-year to $700 million in the final quarter of 2023, marked a 2% upturn from the previous quarter and a 9% surge over the corresponding quarter of the previous year. However, despite this impressive growth, it was not sufficient to quell the unease of investors.
In another discouraging development, Core FFO per share plummeted to $1.63 in the quarter, down from $1.65 a year ago, thereby falling short of the consensus of $1.64 and contributing to the negative sentiment prevailing in the market.
Despite this somber news, the company did highlight rental rate increases on renewal leases of 8.2% on a cash basis in the fourth quarter, which, while commendable, was insufficient to appease the anxious shareholders.
Notably, the company secured total bookings in the quarter, expected to yield $110 million of annualized GAAP rental revenue, including a $39 million contribution from the 0–1 megawatt category and a $13 million contribution from interconnection. These figures, however, failed to alter the discernible downtrend in investor confidence.
As of December 31, 2023, Digital Realty held total debt amounting to approximately $17.4 billion, with cash and cash equivalents totaling $1.63 billion. Such financial figures left little room for solace amid prevailing investor unrest.
In terms of outlook for FY24, the company projects core FFO per share to range between $6.60 and $6.75 (compared to the consensus of $6.83) and anticipates revenue to fall within the range of $5.550 billion to $5.650 billion (contrasting with the consensus of $5.76 billion). The less-than-rosy outlook projected for FY24 failed to inspire investor optimism for the future.
Commenting on the fourth quarter results, President & Chief Executive Officer Andy Power remarked, “Our fourth quarter results marked the culmination of a transformative year for Digital Realty.” While the sentiment may hold a glimmer of hope, it seems to have been largely overshadowed by the prevailing apprehension.
Regarding the price action, DLR shares are currently down 7.24% at $137.85 at last check Friday. This discouraging development reflects the waning enthusiasm and diminished confidence of market participants.
