Despite today's 4.9% jump to $147.0, Digital Realty Trust may soon be running into resistance as it is now within range of its average analyst target price of $145.63. With an average rating of buy, and analysts assigning target prices from 108.0 to 170.0 dollars per share, investors will be asking themselves if the Specialty Real Estate Investment Trust stock can sustain this bullish run.
The market seems to share this optimistic view, since Digital Realty Trust has a short interest of only 4.3% (this is the percentage of the share float that is being shorted). Each short position represents an investor's expectation that the price of the stock will decrease in the future.
Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.
One way to get an idea of the market sentiment on a stock is to check its rate of institutional ownership. In the case of Digital Realty Trust, institutional investors own 102.0% of the shares. This would indicate a positive sentiment towards the stock among institutions. What does this really tell us?
Institutional investors such as hedge funds, investment firms, and wealth managers devote significant resources to identifying good investments. If they have decided to invest in DLR, it probably means they believe it is a solid investment choice. But it could also mean they are buying up shares in an effort to acquire the company or get seats on the board of directors. Also bear in mind that institutions are fallible (just maybe not quite as fallible as the average retail investor), so they may simply be wrong when they think they've found a good stock.
In conclusion, we see mixed market sentiment regarding Digital Realty Trust because of an analyst consensus of little upside potential, a buy rating, an average amount of shares sold short, and a significant number of institutional investors. At Market Inference, we believe that any investment decision should be preceded by an in-depth analysis of the company's fundamental values and a comparison with similar stocks.
Here's a snapshot of some important facts to keep in mind about DLR:
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The stock has trailing 12 month earnings per share (EPS) of $3.62
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Digital Realty Trust has a trailing 12 month Price to Earnings (P/E) ratio of 40.6 compared to the S&P 500 average of 15.97
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The company has a Price to Book (P/B) ratio of 2.51 in contrast to the S&P 500's average ratio of 2.95
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Digital Realty Trust is a Real Estate company, and the sector average P/E and P/B ratios are 25.55 and 2.1 respectively
