BofA Securities cuts VNET stock price target to $11.30, maintains buy

Published 29/05/2025, 11:24
BofA Securities cuts VNET stock price target to $11.30, maintains buy

On Thursday, BofA Securities adjusted its price target for VNET Group Inc (NASDAQ: VNET), lowering it from $13.80 to $11.30 while reaffirming a Buy rating. Currently trading at $5.39, InvestingPro analysis suggests the stock is slightly undervalued, with analysts setting targets ranging from $4.05 to $20.13. The adjustment follows VNET’s announcement of its first-quarter 2025 financial results on May 28, 2025.

VNET Group reported a year-over-year revenue increase of 18% to Rmb2.25 billion for the first quarter of 2025, aligning with consensus and BofA Securities estimates (BofAe). The company’s adjusted EBITDA saw a 26% rise year-over-year to Rmb682 million in the same quarter, surpassing consensus and BofAe by 4% and 2%, respectively. This growth represents an 18% quarter-over-quarter increase, excluding one-time impacts from asset disposals in the fourth quarter of 2024. InvestingPro data shows the company maintains a significant debt burden with a debt-to-equity ratio of 2.9x and a concerning current ratio of 0.73.

The company’s adjusted EBITDA margin expanded by 1.9 percentage points year-over-year to 30.4% in the first quarter of 2025. Management has confirmed its full-year 2025 guidance, anticipating revenues between Rmb9.1 billion and Rmb9.3 billion, marking an increase of 10-13%, and adjusted EBITDA between Rmb2.70 billion and Rmb2.76 billion, which would be an 11-14% rise.

The firm’s management also expects to generate Rmb2 billion in capital from a Real Estate Investment Trusts (REITs) project during the fiscal year 2025. While BofA Securities has largely maintained its forecast for the fiscal year 2025, it has slightly reduced its adjusted EBITDA estimates for the fiscal years 2026-2027 by 1-2%.

The price objective was revised to $11.30 based on a 14x 12-month forward EV/EBITDA multiple, a decrease from the previously applied 15x multiple. This change reflects a recent sector de-rating influenced by an AI chip ban. BofA Securities reiterated its Buy rating on VNET Group Inc, citing the company’s robust growth trajectory supported by the rapid expansion of its wholesale business and strong demand for AI. Despite recent volatility, InvestingPro analysis reveals the stock has delivered an impressive 196% return over the past year. Subscribers can access 15 additional ProTips and a comprehensive Pro Research Report for deeper insights into VNET’s financial health and growth prospects.

In other recent news, VNET Group Inc. reported robust revenue growth of approximately 18% for the first quarter of 2025, significantly surpassing expectations. The company’s adjusted EBITDA saw a notable 26% increase, driven by an 87% year-over-year surge in wholesale revenue. Additionally, VNET signed new contracts securing 61 megawatts in the wholesale segment and 4 megawatts in retail contracts. Moody’s Ratings upgraded VNET Group’s corporate family rating to B2 from B3, citing the ongoing expansion of its wholesale internet data center business and a stable outlook. Citi maintained a Buy rating for VNET, raising the stock price target to $20, and noted potential positive impacts from Tencent (HK:0700)’s upcoming capital expenditure plan. Despite missing earnings per share forecasts in Q4 2024, VNET exceeded revenue expectations with $2.25 billion, reflecting strong demand for AI infrastructure. Jefferies also maintained a Buy rating for VNET, though it reduced the price target to $15.81. The company plans significant capital expenditures in 2025 to support its growth strategy.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2025 - Fusion Media Limited. All Rights Reserved.