Citigroup Reiterates Hold Rating on DuPont Fabros (DFT)

Citigroup is out with a research report this morning, where it reiterates its Hold/High Risk rating on DuPont Fabros Technology Inc.

; it has a $27.00 price target on the stock. The Citi analysts cited the company's recently announced quarterly earnings report, which was in-line with estimates. Those on the Bearish side of DFT are concerned over DFT's ability to fill developments and pricing/demand for data center space, particularly outside of the core Northern Virginia market (NJ/Santa Clara), and its relatively high valuation to non-REIT peers. As for valuation, the analysts remarked, “We use a 33x AFFO multiple and a 16x FFO multiple on 2011 AFFO and FFO estimates, at a premium to its intra-sector peers given its capital restructuring which addressed liquidity needs and its well above average growth platform which is being leased up at attractive, pro-forma yields. The GAAP vs cash nature of DFT's development lease-up will cause a temporarily wider than normal spread between FFO and AFFO. Our target price is at a premium to our NAV due to resilient end market demand and DFT's significant growth pipeline and is underpinned by a cash cap rate of 8.0% on core NOI.”