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On Wednesday, Jefferies analyst Edison Lee adjusted the price target on VNET Group Inc (NASDAQ: VNET), a global data center service provider, reducing it to $15.81 from the previous target of $20.94. Currently trading at $5.38, VNET has delivered an impressive 228% return over the past year, according to InvestingPro data. Despite the price target reduction, the firm maintained a Buy rating on the company’s stock.
VNET Group reported approximately 18% revenue growth for the first quarter of 2025, surpassing both Jefferies’ estimates and consensus expectations by about 6% and 2%, respectively. The company’s adjusted EBITDA demonstrated a significant increase of 26%, which is 15% and 8% higher than Jefferies’ forecasts and the consensus, respectively. InvestingPro analysis reveals that while VNET trades at a low P/E ratio relative to its near-term earnings growth, the company is currently burning through cash rapidly - just two of the twelve key insights available to subscribers.
The primary driver of this financial outperformance was attributed to the wholesale revenue, which saw an impressive year-over-year growth of 87%, outpacing Jefferies’ estimates by 24%. This surge was credited to a swift ramp-up in operations that led to an increase in the utilization rate by 3.6 percentage points quarter-over-quarter, reaching 76.2%.
VNET Group also reported the signing of new contracts, securing 61 megawatts (MW) in the wholesale segment, an increase from the 55MW disclosed in the previous quarter, and an additional 4MW in retail contracts. The company experienced an uptick in the monthly recurring revenue (MRR) from its retail business.
The management team at VNET expressed a positive outlook on the demand for their services. Despite the current trading at approximately 11 times the estimated 2025 enterprise value to EBITDA ratio, which is lower than the projected compound annual growth rate (CAGR) of 28%, Jefferies continues to favor VNET Group as their top pick in the sector. With a debt-to-equity ratio of 2.9x and current price near its InvestingPro Fair Value, investors seeking deeper insights can access the comprehensive Pro Research Report, available exclusively to subscribers.
In other recent news, VNET Group Inc. reported its financial results for the fourth quarter of 2024, showing mixed outcomes. The company reported earnings per share of $0.06, falling short of the forecasted $0.11, but exceeded revenue expectations by reporting $2.25 billion against a forecast of $2.06 billion. Moody’s Ratings upgraded VNET Group’s corporate family rating to B2 from B3, with an outlook revised to stable, citing the company’s expansion in its wholesale internet data center business as a key factor. Citi analyst Louis Tsang maintained a Buy rating for VNET Group and raised the price target to $20.00, highlighting the company’s robust capital expenditure plans and growth prospects. VNET Group’s capital spending is expected to rise significantly in 2025, with a projected range of RMB 10 billion to RMB 12 billion. The company anticipates delivering 400-450 megawatts of capacity in the next 12 months, driven by strong demand in China’s data center market. The company’s liquidity remains adequate, with a cash balance of RMB 1.5 billion as of year-end 2024. VNET Group’s strategic shareholder, Shandong Hi-Speed Holdings, is expected to aid in the company’s operational synergies and funding access.
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