Is it time to invest in KKR as it teams up with GIP to buy CyrusOne?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Nov 15, 2021
  • KKR shares on Monday edged slightly lower despite agreeing to buy CyrusOne.
  • The company has teamed up with Global Infrastructure Partners for the $15 billion deal.
  • The all-cash deal represents a valuation of about $90.50 per share.

On Monday, KKR & Co Inc. (NYSE:KKR) shares edged slightly lower after announcing a partnership deal to buy CyrusOne Inc. (NASDAQ:CONE). The company has teamed up with Global Infrastructure Partners (GIP) to buy the New York-based data centre REIT in an all-cash deal worth $15 billion.

The purchase represents approximately a 25% premium on the CyrusOne closing price on 27th September, the last trading session before the market started to speculate about a potential acquisition.

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In another deal, American Tower Corp (NYSE:AMT) agreed to buy CoreSite Realty Corp (NYSE:COR) for $10.1 billion, as the data centre REIT space continues to consolidate.

KKR looks undervalued

From an investment perspective, KKR shares trade at a compelling P/E ratio of 8.94, making the stock an attractive option for value investors. 

In addition, analysts expect its earnings per share to grow at an average annual rate of 33.33% over the next five years. Therefore, the stock could gain the attention of long-term growth investors.

KKR shares are up nearly 97% this year, compared to the S&P 500 Index’s gain of just over 30%. Therefore, the stock could pull back in the short term.

Source – TradingView

Technically, KKR shares seem to be trading within a descending channel formation in the intraday chart. However, the stock is still far from reaching oversold conditions after recently trading deep into the overbought territory.

Therefore, with shares trading several levels above the 100-day moving average, the current decline could continue for the foreseeable future.

As a result, investors could target extended declines at about $75.03, or lower at $71.77. On the other hand, if the stock bounces back prematurely, it could find resistance at $80.98, or higher at $83.96.

It may not be too late to swoop in for profits

In summary, although KKR shares are down more than 5% this month, the stock is still up more than 86% this year, thus leaving little room for more upward movement.

Therefore, with shares far from reaching oversold conditions, it may not be too late to take some profits.

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