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On Monday, DA Davidson initiated coverage on Nebius Group (NASDAQ:NBIS), assigning a Buy rating to the company’s shares and establishing a price target of $50. Currently trading at $36.22 with a market capitalization of $10.48 billion, the stock has shown significant momentum with a 110% gain over the past six months, despite a recent 10% pullback last week. The research firm’s approach to evaluating Nebius Group is notably different from its standard methodology. According to InvestingPro data, the company maintains strong liquidity with a current ratio of 9.64 and holds more cash than debt on its balance sheet. DA Davidson’s analyst emphasized the distinct strategy employed in their assessment, stating, "We are initiating coverage with a BUY rating and $50 price target representing 12x CY26 revenue."
The firm’s unique evaluation process, termed the ’DaVinci coverage’, diverges from conventional analysis by prioritizing the technological aspects and potential of early-stage ventures over traditional financial and valuation metrics. This method is intended to assess companies whose potential is not yet fully reflected in their current financial statements. InvestingPro subscribers can access 12 additional key insights about Nebius Group, including detailed analysis of its growth prospects and financial health metrics.
DA Davidson’s analyst elaborated on the rationale behind the optimistic outlook for Nebius Group, "We note that for our DaVinci coverage, we employ an early stage venture approach which focuses on technology and opportunity over financials and valuation metrics, making these recommendations far more speculative than the rest of our coverage." This statement underscores the speculative nature of the recommendation, which is based on the company’s innovative technology and market opportunities rather than its immediate financial performance.
The price target of $50 reflects a significant expectation of growth, as it is predicated on a multiple of 12 times the company’s projected revenues for the calendar year 2026. This forward-looking perspective indicates DA Davidson’s confidence in Nebius Group’s long-term revenue generation capabilities.
The initiation of coverage and the setting of a price target are key indicators of DA Davidson’s positive stance on Nebius Group, suggesting the firm sees a promising future for the company based on its technological potential and market opportunities.
In other recent news, Nebius Group NV reported its Q4 2024 earnings, revealing ambitious growth plans despite facing operational challenges. The company ended the year with a substantial cash reserve of $2.4 billion, bolstered by a $700 million capital raise in the fourth quarter. Nebius projects an annualized run rate (ARR) of $220 million by March 2025 and aims for $750 million to $1 billion by December 2025. Revenue guidance for 2025 is set between $500 million and $700 million, with the company expecting EBITDA to approach breakeven during the year. The firm is also planning to expand its data center capacity, targeting 100 megawatts by year-end. Analyst firms did not provide upgrades or downgrades in the recent developments, but the company’s strategic plans indicate a focus on scaling its AI infrastructure. The company is navigating longer deal lead times and customer migration issues, which have impacted its quarterly performance. Despite these hurdles, Nebius remains committed to becoming a leader in the AI infrastructure market.
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