Data Center Stocks Gain on Terremark Deal

Leading data center stocks are sharply higher today as investors buy up shares of potential acquisition targets in the wake of Verizon’s $1.4 billion deal to acquire cloud hosting specialist Terremark. The sector gained ground even as the broader market was sharply lower, with the Dow sliding more than 130 points by midday.

Shares of Terremark (TMRK) soared 35 percent, gaining $4.90 to trade at $18.95 a share, just shy of Verizon’s $19 strike price. The deal represents a happy exit for many Terremark investors, who have seen shares rally from a low of $2.18 in early 2009.

Here’s a look at other gainers in the data center and cloud computing sector:

As a managed hosting specialist with a cloud strategy, Savvis is similar to Terremark with its focus on enterprise-centric cloud customers. Analyst Jonathan Atkin of RBC noted that the Verizon deal values Terremark at a multiple of 13.4 times its 2011E EBITDA. At the same valuation, Atkins said, shares of Savvis would trade at $53.

It’s also worth noting that today’s gains once again reinforces Jim Cramer’s dismal track record with data center stocks. Last Thursday Cramer advised his CNBC viewers to sell shares of Equinix. "I don’t think the data centers, the physical space, is going to grow the way people think," he said. If listeners sold their data center stocks, they’re probably regretting it today.

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