Switch Inc: SWCH Stock Up 112% in 2019, Unfazed By Tech Sell-Off

Switch, Inc. Market Crushing Tech Stock Could Double Again
iStock.com/metamorworks

SWCH Stock Could Double From Its Current Level

Concerns about the ongoing trade war between the U.S. and China—and its effects on the global economy—are finally catching up to Wall Street, and it isn’t pretty.

The early-August sell-off, especially in the tech sector, has been indiscriminate. It doesn’t matter whether a company has exposure to China, or whether it’s a small-cap or blue-chip, tech stocks are in the red.

There are some exceptions though, one being Switch Inc (NYSE:SWCH). SWCH stock has been bullish all year, hitting a new 52-week high of $14.50 on August 9, representing a year-to-date gain of 112%. And the outlook for the data center company looks even more bullish over the coming year.

This is good news for Switch investors. While Switch stock has been on a tear in 2019, it’s up just over two percent over the last 12 months and down approximately 15% from its October 2017 initial public offering (IPO) price. And despite the stock’s strong 2019 gains, Switch is still trading in an attractive range.

Advertisement

Switch Inc Overview

Switch Inc is a technology infrastructure company that has developed large, advanced data centers. The company currently owns and operates three main campus locations, which it calls “Primes,” that cover up to 4.0 million square feet. (Source: “Company Profile,” Switch Inc, last accessed August 8, 2019.)

Switch’s over 800 customers include some of the largest tech and digital media companies, cloud and managed service providers, telecommunications companies, and financial institutions.

SWCH Stock Information

Market Cap $3.6 Billion
52-Week Change 3.92%
52-Week High $14.50
52-Week Low $6.39
Shares Outstanding 36.0 Million
Float 36.3 Million
50-Day Moving Average $13.38
200-Day Moving Average $11.16

(Source: “Switch, Inc. (SWCH),” Yahoo! Finance, last accessed August 8, 2019.)

Switch stock has had a great year, advancing more than 110%. The broader market experienced a big sell-off in May and the tech sector got hit hard in early August, but neither of those events had any impact on this stock.

In fact, SWCH stock has been bullish all year. It formed a golden cross pattern on its price chart in April, a bullish indicator wherein the 50-day moving average crosses over the 200-day moving average. True to form, Switch’s share price has climbed steadily higher since then.


Chart courtesy of StockCharts.com

Correlation is not causation, however. Switch stock could experience a pullback on the heels of profit-taking or broad-based fears of how a trade war will affect American tech stocks. However, thanks to the company’s geographic base in the U.S. and its international customers, Switch shares should bounce back faster than most.

Strong Business Momentum Continues in Q2

On August 7, Switch Inc announced that its revenue for the second quarter (ended June 30, 2019) increased 9.2% year-over-year to $111.6 million. (Source: “Switch Announces Second Quarter 2019 Financial Results,” Switch Inc, August 7, 2019.)

The company reported second-quarter net income of $4.6 million, or $0.01 per share, compared to net income of $9.5 million, or $0.02 per share last year. Net income in the second quarter of 2019 was hurt by onetime charges of $8.8 million related to interest rate swaps, equating to $0.03 per share.

Adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) for the second quarter was $58.3 million, a 16.3% increase from the $50.3 million recorded in the same prior-year period.

During the second quarter, the company’s financial performance exceeded initial expectations, which has resulted in increased guidance for full-year 2019 revenue and adjusted EBITDA.

Total revenue is now expected to be in the range of $442.0 to $448.0 million. At the midpoint, this represents year-over-year growth of 9.6%. Adjusted EBITDA is expected to be in the range of $223.0 to $229.0 million. At the midpoint, this represents annual growth of 12%.

Analyst Take

Switch Inc has been having a great year, reporting strong performances on both its top and bottom lines. The company also reported solid numbers for new bookings. Switch also expanded its land portfolio during the last quarter, laying the foundation for continued growth. It also raised its full-year guidance.

While the stock market will experience volatility, a return to momentum in the tech sector should help propel SWCH stock above its $17.00 IPO price.