What is EQIX's Intrinsic value?

Equinix Inc (EQIX) Intrinsic Value Analysis

Executive Summary

As of May 29, 2025, Equinix Inc's estimated intrinsic value ranges from $576.34 to $764.03 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $764.03 -13.2%
Discounted Cash Flow (5Y) $576.34 -34.6%
Dividend Discount Model (Multi-Stage) $580.67 -34.1%
Dividend Discount Model (Stable) $752.46 -14.6%

Is Equinix Inc (EQIX) undervalued or overvalued?

With the current market price at $880.62, the stock appears to be significantly overvalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Equinix Inc's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.37 0.48
Cost of equity 5.6% 7.5%
Cost of debt 4.0% 5.6%
Tax rate 15.9% 17.1%
Debt/Equity ratio 0.21 0.21
After-tax WACC 5.2% 7.0%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 6.1% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $8,748 (FY12-2024) to $15,712 (FY12-2034)
  • Net profit margin expansion from 9% to 21%
  • Capital expenditures maintained at approximately 36% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $576 $71,547M 91.5%
10-Year Growth $764 $89,908M 84.0%
5-Year EBITDA $812 $94,620M 93.6%
10-Year EBITDA $970 $110,014M 86.9%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 183.3%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 6.5%
  • Long-term growth rate: 4.0%
  • Fair value: $580.67 (-34.1% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 7.5% (Low) to 5.6% (High)
  • Long-term growth rate: 3.0% (Low) to 4.9% (High)
  • Fair value range: $146 to $1,359
  • Selected fair value: $752.46 (-14.6% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $86142M
Enterprise Value $101312M
Trailing P/E 92.93
Forward P/E 82.31
Trailing EV/EBITDA 19.30
Current Dividend Yield 201.15%
Dividend Growth Rate (5Y) 14.74%
Debt-to-Equity Ratio 0.21

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 33% $229.21
Discounted Cash Flow (5Y) 28% $144.08
Dividend Discount Model (Multi-Stage) 22% $116.13
Dividend Discount Model (Stable) 17% $112.87
Weighted Average 100% $669.22

Investment Conclusion

Based on our comprehensive valuation analysis, Equinix Inc's weighted average intrinsic value is $669.22, which is approximately 24.0% below the current market price of $880.62.

Key investment considerations:

  • Strong projected earnings growth (9% to 21% margin)
  • Consistent cash flow generation
  • Conservative capital structure (Debt/Equity of 0.21)
  • Historical dividend growth of 14.74%

Given these factors, we believe Equinix Inc is currently significantly overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.