Csquare (CSQR) offers exposure to growing demand for multi-tenant data centers, though its high debt and the difficulty of carrying out its expansion plans remain key concerns, Morgan Stanley said Monday in a report.
Csquare has about 670 megawatts of identified expansion capacity, with development costs of $4 million to $8 million per megawatt and targeted returns implying 17% to 25% yields, Morgan Stanley said. Continued cloud adoption, hybrid IT demand and rising AI inference workloads may support growth, the report said.
Management expects to add about 30 megawatts of new capacity each year, supporting 11% revenue gains and 12% adjusted EBITDA expansion through 2030, Morgan Stanley said. Rising earnings could help reduce debt from about nine times EBITDA after the IPO to seven times by the end of 2028, the report said.
Morgan Stanley said valuation upside is possible if Csquare can expand while lowering its debt load, adding capacity, strengthening its network and continuing to reduce leverage. High debt, risks around its ability to expand as planned and possible share sales by its majority owner, Brookfield (BN), remain concerns, the report said.
Morgan Stanley initiated coverage of Csquare stock with an overweight rating and a mid-2027 price target of $26.
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