Digital Realty Trust (DLR) is back in focus after opening BCN1, its first Barcelona data center. The 14 MW facility is positioned near key subsea cable routes connecting the Americas, Europe, and beyond.

BCN1 and the new Innovation Lab arrive during a period of firm momentum, with the 1-day and 7-day share price returns of 0.85% and 3.97% feeding into a 24.92% year to date share price gain and a 3-year total shareholder return of 112.38%.

If this kind of digital infrastructure story interests you, it may be a good time to see what else is shaping the data center and AI buildout via 47 AI infrastructure stocks

After a 24.92% year to date gain and a 3 year total return above 100%, plus an indicated 23.94% intrinsic discount, the key question is whether DLR is still mispriced or whether the market is already accounting for future growth.

Most Popular Narrative: 75.3% Overvalued

According to the most followed narrative, Digital Realty Trust's fair value of $110.45 sits well below the last close of $193.67, creating a sharp valuation gap that hinges on how its growth story plays out.

Digital Realty should be a leading global provider of AI-ready and hyperscale data centers, with stronger cloud partnerships, a global footprint, and higher-margin interconnection services.

Curious what kind of revenue glide path and profit margins are assumed to justify that outcome, even with a rich future earnings multiple baked in? The narrative leans on AI demand, global expansion and higher value interconnection revenue to support its cash flow forecast, along with a discount rate that keeps those future dollars relatively valuable today.

Result: Fair Value of $110.45 (OVERVALUED)

However, this hinges on AI driven demand and cost control, and any slowdown in hyperscaler leasing or higher funding costs could quickly challenge that optimistic setup.

Another Lens on Value

While the user narrative flags Digital Realty Trust as overvalued at a fair value of $110.45, our DCF model points the other way, with an estimated future cash flow value of $254.64 versus a $193.67 share price. This suggests the stock trades below that cash flow based estimate. Which story feels more convincing to you?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Digital Realty Trust for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 46 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With such mixed signals on value and expectations, it helps to look beyond the headlines and move quickly to form your own evidence based view using 3 key rewards and 3 important warning signs

Looking for more investment ideas?

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• Target resilient cash generators by scanning 46 high quality undervalued stocks that combine solid business quality with prices that may not fully reflect their fundamentals.
• Prioritize stability and sleep-better-at-night holdings using the 65 resilient stocks with low risk scores focused on companies with lower overall risk scores.
• Hunt for future standouts early with the screener containing 22 high quality undiscovered gems that highlights high quality businesses still flying under most investors' radar.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.