GDS stock price target cut to $38 at TD Cowen

On Thursday, TD Cowen maintained a Buy rating on GDS Holdings (NASDAQ:GDS), although the firm’s analyst Michael Elias reduced the price target to $38 from the previous $39. The adjustment followed the release of GDS’s fourth-quarter 2024 results, which did not meet expectations, and the company’s initial outlook for 2025 also presented a downside, particularly after the deconsolidation of DayOne as a subsidiary. According to InvestingPro data, the stock has seen a significant -8.68% decline over the past week, though it maintains a remarkable 276% return over the last year. The current analyst consensus shows strong bullish sentiment, with targets ranging from $7.32 to $62.89.

GDS Holdings, which operates data centers, reported a shortfall in its 4Q24 performance, with revenue growth of 3.67% and an EBITDA of $602 million for the last twelve months. Despite this, management highlighted a "very strong" demand for hyperscale service providers (HSP) in China. This was evidenced by a significant 152MW deal signed with one HSP provider that spans two campuses located in Langfang and Changshu. The deal underscores the robust demand within the Chinese market, driven by advancements in artificial intelligence. InvestingPro analysis reveals the company’s Fair Value suggests the stock is currently fairly valued, with 12 additional exclusive ProTips available for subscribers.

Additionally, GDS management pointed to strong demand in Southeast Asia, signaling potential growth opportunities beyond China. The company has also made progress on its China Real Estate Investment Trust (C-REIT), reportedly six months ahead of the initial schedule. This progress could indicate an efficient execution of the company’s strategic initiatives, despite the lower-than-expected financial results. The company’s overall financial health score of 2.09 (FAIR) from InvestingPro reflects these mixed signals, with particular strength in growth potential but challenges in profitability metrics.

The maintained Buy rating from TD Cowen suggests that the firm sees potential in GDS Holdings’ long-term growth trajectory, despite the immediate setbacks. The data center operator’s ability to secure large deals and advance in its strategic plans, such as the C-REIT, may provide a basis for the analyst’s continued positive outlook on the stock.

Investors and stakeholders in GDS Holdings may consider the revised price target and the maintained Buy rating as they assess the company’s performance and future prospects in the rapidly evolving data center and cloud services industry.

In other recent news, GDS Holdings has reported significant developments that have captured the attention of investors and analysts alike. The company’s recent fourth-quarter earnings highlighted its largest-ever single order of 152 megawatts, signaling a strong rebound in China’s data center market. JMP Securities responded by raising GDS Holdings’ price target to $40, maintaining a Market Outperform rating, and citing improving fundamentals and potential for a successful international IPO. Meanwhile, Raymond (NSE:RYMD) James upgraded the stock to Strong Buy with a $53 target, noting the company’s strategic shift beyond mainland China could lead to more stable growth.

Jefferies also upgraded GDS Holdings to Buy, setting a $45 target, as the company focuses on de-leveraging and securing funds without significant shareholder dilution. Morgan Stanley (NYSE:MS) maintained an Overweight rating with a $39 target, following a private REIT deal that could help reduce leverage and fund capital expenditures in 2025. RBC Capital Markets, however, downgraded GDS Holdings to Sector Perform despite increasing the price target to $37, reflecting the belief that the stock’s current price already accounts for its operational successes.

These developments underscore GDS Holdings’ strategic initiatives and market positioning, as the company continues to expand its footprint both domestically and internationally. Investors are closely watching the company’s moves, particularly in light of the heightened demand from domestic hyperscalers and revised international revenue projections. The varied analyst ratings and price targets indicate differing levels of confidence in GDS Holdings’ future performance, with attention focused on its strategic execution and market response.

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