DigitalBridge Group: A Buy Opportunity Amid Index Exclusion and Institutional Support

The recent exclusion of DigitalBridge Group (DBRG) from the Russell Small Cap Comp Growth Index on June 27, 2025, has sparked short-term volatility in its stock. Yet beneath the noise of this index rebalancing—a routine process reflecting shifting market dynamics—lies a compelling investment case. DBRG's Q1 2025 results, strategic moves, and surging institutional support suggest its digital infrastructure growth story remains underappreciated. At a price of ~$10.28, the stock trades far below consensus targets, offering a rare entry point for investors.

The Russell Exclusion: A Technicality, Not a Knockout

DBRG's removal from the Russell Small Cap Comp Growth Index, effective June 27, was part of the quarterly rebalancing of the Alger Russell Innovation Index. Such moves are driven by objective criteria like market cap, stock price trends, and sector alignment. While the exclusion may have spooked some investors, it reflects neither a failure of DBRG's fundamentals nor a loss of relevance. The Russell reconstitution, which saw record trading volumes of $102.455 billion in Nasdaq-listed securities, is a mechanical process that often dislodges companies due to changes in valuation or sector positioning—not operational weakness.

Q1 2025: A Quarter of Strategic Momentum

DBRG's first-quarter performance underscores its resilience. The company reported 24% year-over-year growth in free revenue and a 79% surge in FRE (Free Real Estate Equity), a metric tied to its asset management business. These gains stem from its $4.5 billion acquisition of Zayo Group, completed in late 2024. This deal expanded DBRG's footprint in AI-driven connectivity infrastructure, a sector poised for explosive growth as enterprises and governments invest in next-gen networks.

The Zayo acquisition has already begun paying dividends. The combined entity now manages over $80 billion in digital infrastructure assets, including fiber networks, data centers, and edge computing facilities. With AI and 5G adoption accelerating, these assets are critical to global tech infrastructure—a tailwind DBRG is uniquely positioned to capitalize on.

Institutional Buyers Are Double-Downing

While index exclusion often triggers passive fund outflows, DBRG's stock has drawn significant active investor support. Notably:
- Schwartz Investment Management increased its stake by 23.7%, now holding 12.4 million shares.
- Lazard Asset Management boosted its holdings by 384.5%, acquiring 5.8 million shares.

Such moves signal confidence in DBRG's long-term narrative. These institutions are likely betting on the Zayo deal's synergies, the company's 9.8% dividend yield, and its ability to profit from the secular shift toward digital infrastructure.

Analysts Are Raising the Bar

Analyst sentiment has turned decisively bullish. Truist Securities recently upgraded its price target to $15, citing DBRG's “outsized exposure to AI-driven connectivity demand.” The consensus target now sits at $16.28, a 60% premium to current levels.

Why Buy Now?

DBRG's valuation appears deeply undervalued relative to its growth prospects. At ~$10.28, the stock trades at 6.2x 2025E EV/EBITDA, below peers like CyrusOne (CYR, 8.5x) and Equinix (EQIX, 15.3x). The Zayo deal's integration should further expand margins, while the dividend yield acts as a safety net.

The Russell exclusion, while a temporary headwind, has created a buying opportunity for investors willing to look past short-term noise. DBRG's Q1 metrics, institutional backing, and analyst upgrades all point to a compelling risk-reward profile.

Conclusion: A Buy at $10.28

DigitalBridge Group's exclusion from the Russell Small Cap Comp Growth Index is a technicality that overlooks its strategic strengths. With a robust pipeline of digital infrastructure assets, surging FRE metrics, and institutional investors doubling down, DBRG presents a compelling contrarian play. At current levels, it's a buy—especially for investors focused on the secular growth of AI and 5G connectivity.