Iron Mountain: Generative AI May Pop The Bubble

(9min)

Summary

  • IRM's valuation is unsustainably high, trading at a 100% premium to REIT peers despite core business risks.
  • Growth is still driven by the paper storage segment, but I see secular decline risk as digital transformation and generative AI accelerate.
  • Heavy debt-fueled investment in data centers hasn't yet shifted the business mix enough to justify the current premium.
  • I maintain a sell rating, as the risk of multiple compression outweighs recent strong growth and management's optimistic guidance.
  • Looking for a helping hand in the market? Members of Best Of Breed Growth Stocks get exclusive ideas and guidance to navigate any climate. Learn More »

Engineer asian and african woman wearing safety helmet and vest holding clipboard and take note on the paper in the automotive part warehouse.Products and corrugated cardboard. Factory for the manufacture and processing of paper.

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Iron Mountain (NYSE:IRM) has been one of the biggest winners in the REIT sector over the past handful of years. The stock was once written off as a paper storage business in secular decline, but the market

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This article was written by

35.16K Followers

Julian Lin is a financial analyst. He finds undervalued companies with secular growth that appreciate over time. His approach is to look for companies with strong balance sheets and management teams in sectors with long growth runways.

Julian is the leader of the investing group Best Of Breed Growth Stocks where he only shares positions in stocks which have a large probability of delivering large alpha relative to the S&P 500. He also combines growth-oriented principles with strict valuation hurdles to add an additional layer to the conventional margin of safety. Features include: exclusive access to Julian's highest conviction picks, full stock research reports, real-time trade alerts, macro market analysis, individual industry reports, a filtered watchlist, and community chat with access to Julian 24/7. Learn more.

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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