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On Wednesday, Jefferies analyst Edison Lee revised the price target for GDS Holdings (NASDAQ: NASDAQ:GDS), a leading data center provider in China, to $37.32 from the previous target of $47.76. Despite the reduction, the firm maintains a Buy rating on the company’s stock. According to InvestingPro data, GDS has demonstrated remarkable performance with a 256% return over the past year, and analysts maintain a strong bullish consensus with targets ranging from $29.02 to $53.16.
The adjustment comes after GDS Holdings announced the issuance of a $500 million 7-year convertible bond (CB) with a 2.25% coupon rate, which is convertible at $33.08 per American Depository Share (ADS), representing a 35% premium. Additionally, the company issued 5.2 million new ADSes at a price of $24.5 per ADS, raising approximately $123 million. These financial movements are primarily aimed at refinancing the company’s $620 million CB that may be puttable in March 2027. InvestingPro analysis reveals the company operates with a total debt of $6.04 billion, though it maintains a perfect Piotroski Score of 9, indicating strong financial health.
According to Lee, the estimated incremental dilution from these new issuances is around 5%. However, he emphasized that GDS Holdings’ core narrative remains intact, highlighting growth and spinoff opportunities at DayOne, as well as the company’s ongoing debt reduction efforts in China.
The analyst expressed continued optimism for GDS Holdings, stating, "We remain bullish, but adjust our PT down according to our latest dilution estimate." This indicates that while the immediate financial adjustments have led to a lower price target, the underlying confidence in the company’s strategic direction and market position has not wavered.
In other recent news, GDS Holdings has released its first-quarter 2025 earnings, showcasing a strong performance that signals a recovery in China’s data center market. The company plans to expand its capacity significantly, with 900 megawatts (MW) in China and 700 MW internationally through its Day One branch over the next four years. Analysts at JMP have maintained a Market Outperform rating with a $40 price target, reflecting confidence in GDS Holdings’ growth potential. Meanwhile, Nomura/Instinet has initiated coverage with a Buy rating and a $35.80 price target, highlighting the company’s advantage in China’s data center sector and its potential in the AI inferencing market.
JPMorgan has raised its price target for GDS Holdings to $34 while maintaining a Neutral rating, noting the company’s cautious approach amid uncertainties in GPU supply and AI demand. GDS Holdings is continuing its refinancing activities, aiming to reduce its net debt over the next two years. TD Cowen has adjusted its price target to $38 from $39 but maintained a Buy rating, indicating potential for long-term growth despite recent financial shortfalls. The company has secured a significant 152MW deal with a hyperscale service provider in China, underscoring strong demand in the region. Additionally, GDS Holdings is making progress with its China Real Estate Investment Trust (C-REIT), reportedly ahead of schedule, which could bolster its strategic initiatives.
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