Cloud adoption is accelerating in Europe, and InterXion's (NYSE:INXN) portfolio of high-quality carrier/cloud-neutral interconnection-focused data centers across major markets is a high-value asset. Utilization is healthy, margins are improving, and the company is looking down an attractive growth runway. It also doesn't hurt that InterXion is an attractive, "gettable" standalone asset that could attract M&A interest.
The "but" for me is that I struggle to find the value in the shares at this price. I won't necessarily disagree that InterXion could be taken out at a price above today's level and still make sense for the buyer, but I hate relying on M&A-based valuations as my primary valuation method. Looking at other approaches like EV/EBITDA and discounted cash flow, though, suggests that the market is already more than up to speed on the potential here, and I believe InterXion will have to produce double-digit long-term revenue growth to drive a higher price.
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InterXion's Data Center Opportunity Is Exciting, But The Valuation Is Demanding