DCF Studio

    EQIX · NMS · Real Estate

    Equinix, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD -24.93

    Market price

    USD 1021.34

    Implied upside

    -102.4%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedCapital expenditure runs at 36.8% of revenue against depreciation of 23.0%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Current EV/EBITDA of 29.8x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD -24.93-102.4%
    Exit multiple
    USD 583.25-42.9%
    Market price
    USD 1021.34

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m33m65mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 10.0bnUSD 10.8bnUSD 11.7bnUSD 12.7bnUSD 13.7bn+8.3%
    EBITUSD 1.9bnUSD 2.0bnUSD 2.2bnUSD 2.4bnUSD 2.6bn+8.3%
    NOPATUSD 1.6bnUSD 1.7bnUSD 1.9bnUSD 2.0bnUSD 2.2bn+8.3%
    Add depreciation & amortisationUSD 2.3bnUSD 2.5bnUSD 2.7bnUSD 2.9bnUSD 3.1bn+8.3%
    Less capital expenditureUSD -3.7bnUSD -4.0bnUSD -4.3bnUSD -4.7bnUSD -5.0bn+8.3%
    Less increase in working capitalUSD -164.1mUSD -177.6mUSD -192.3mUSD -208.2mUSD -225.4m+8.3%
    Free cashflow to firmUSD 47.4mUSD 51.4mUSD 55.6mUSD 60.2mUSD 65.2m+8.3%
    Discount factor0.95660.87550.80120.73320.6710-
    Present valueUSD 45.4mUSD 45.0mUSD 44.6mUSD 44.1mUSD 43.7m-0.9%
    Present Value Of The ForecastUSD 222.8m

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.982Reported 0.973, pulled toward 1.0 (Blume)
    Cost of equity10.40%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 100.8bn81.6% of capital
    Total debtUSD 22.7bn18.4% of capital, book value as a proxy
    Tax rate14.4%Effective, capped at statutory
    WACC9.27%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD -24.93

    99% of EV

    Forecast FCFF, final year
    USD 65.2m
    Capex at depreciation, working capital in reinvestment
    USD 2.3bn
    Less reinvestment at g/ROIC (27.0% of NOPAT)
    USD -611.8m
    Capitalised
    USD 1.7bn
    ROIC (WACC floor)
    9.3%
    Terminal value, undiscounted
    USD 25.1bn
    Terminal value, discounted
    USD 16.8bn
    Enterprise value
    USD 17.1bn
    Less net debt
    USD 19.5bn
    Equity value
    USD -2.4bn

    Exit at 20.0x EBITDA

    Value per shareUSD 583.25

    100% of EV

    Terminal value, undiscounted
    USD 114.0bn
    Terminal value, discounted
    USD 76.5bn
    Enterprise value
    USD 76.7bn
    Less net debt
    USD 19.5bn
    Equity value
    USD 57.2bn

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    7.27%38.9940.1541.3142.4743.63
    8.27%2.033.003.984.965.94
    9.27%-26.60-25.76-24.93-24.09-23.25
    10.27%-49.34-48.62-47.89-47.17-46.44
    11.27%-67.78-67.15-66.52-65.88-65.25

    Outlined: this model. Green text: above today's price of 1021.34. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year8.3%63.3%+55.0pp
    Discount rate9.3%3.3%-6.0pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.