Equinix Could Surprise Today

Equinix (EQIX) is set to report earnings after the market closes today. Equinix is the leading global provider of network-neutral data center and interconnection services, offering premium colocation, traffic exchange and outsourced IT infrastructure solutions. Equinix centers serve as critical, core hubs for IP networks and Internet operations worldwide. With IBX centers located in 18 strategic markets across North America, Europe and Asia-Pacific,

EQIX is expected to earn 14 cents per share for its 2nd quarter. We expect Equinix to announce earnings that will beat investors’ and analysts’ expectations. The company has a history of posting huge surprises. Three of the last 4 quarters, EQIX has beat estimates by more than 100%. The one miss was equally as substantial at 143%.

Analysts’ estimates have been rising during the quarter, starting at penny and now stand at the 13 cent consensus. Wall Street believes the IT company will see its sales rise by 85% for this quarter and anticipates 72% growth next quarter.

With a muscular earnings report, EQIX has a chance to move up big-time as 38% of the float is sold short, meaning investors sold the stock without owning it. The idea is to sell the stock at one price and buy it back at a lower price and keep the difference as a profit. However, if the stock moves higher, shorters lose money by paying more than they sold it for.

If news creates an unusual amount of buying in a stock that has a lot of shares sold short, like EQIX, loses can mount quickly for investors who shorted the stock. All this buying pressure can create what is called a short squeeze. A short squeeze occurs when the shorts rush to buy back the stock and force its price up, causing more shorts to buy back the stock to limit loses and then cycle repeats itself. All this buying can move the stock price dramatically higher. Let’s hope EQIX’s quarterly report card can light the short fuse.

Equinix’s shares do have a history of increasing following its eps announcements. Last time out, EQIX’s stock moved up about 15% in days immediately following its 1st quarter call.

Suggested Stop: $82.86

Disclosure: None