On Thursday, Jefferies reaffirmed its Buy rating on GDS Holdings (NASDAQ: NASDAQ:GDS) shares, maintaining a price target of $27.06. The firm's analyst highlighted the company's recent discussion about its growth potential, competitive position, and the broader Chinese market during a hosted call. GDS Holdings addressed several key points, including its growth strategy and capital expenditure outlook.
GDS management expressed confidence in their ability to secure 200 megawatts (MW) of new orders annually. This is part of their strategy to reach a goal of 1 gigawatt (GW) by the end of 2027. The company's visibility into long-term customer demand was cited as a supporting factor for this objective.
Despite the company's clear growth targets, the market response has been muted due to the absence of any new, positive developments. However, the analyst noted that there were no negatives presented during the call that would impact the company's prospects.
In terms of capital expenditures, the analyst pointed out that there is no expected increase in China's capital spending. Achieving a positive free cash flow (FCF) by the year 2025 remains a top priority for GDS Holdings, as stated by the management during the call.
In summary, Jefferies' position on GDS Holdings remains unchanged, with the analyst seeing the company's strategy and market outlook as solid, despite the lack of new excitement in the market. The reaffirmed Buy rating and price target reflect the firm's ongoing confidence in the company's performance and future prospects.
In other recent news, GDS Holdings Limited reported Q3 revenue of RMB2.97 billion ($422.6 million), a 17.7% YoY increase. However, this figure fell short of the consensus estimate of RMB2.99 billion.
The company's adjusted EBITDA rose 15% YoY to RMB1.30 billion ($184.6 million). A net loss of RMB231.1 million ($32.9 million) was reported for Q3, a reduction from a loss of RMB420.8 million in the same period last year.
In addition to these financial results, GDS Holdings reported a 20.2% YoY increase in the total area committed and pre-committed to 785,692 square meters. The area utilized rose 20.9% YoY to 481,819 square meters, with a utilization rate of 74.4% for area in service.
The company maintained its full-year 2024 guidance for total revenues of RMB11,340-11,760 million and adjusted EBITDA of RMB4,950-5,150 million. However, GDS Holdings raised its capital expenditure forecast to RMB11,000 million from RMB6,500 million, attributing this to an acceleration of business expansion. These are among the recent developments concerning GDS Holdings.
InvestingPro Insights
GDS Holdings' growth strategy and capital expenditure outlook, as discussed in the Jefferies call, align with several key metrics and insights from InvestingPro. The company's revenue growth of 11.95% over the last twelve months and a quarterly growth of 17.73% in Q3 2024 support management's confidence in securing new orders and expanding capacity.
However, investors should note that GDS operates with a significant debt burden, as highlighted by an InvestingPro Tip. This could potentially impact the company's goal of achieving positive free cash flow by 2025. Another InvestingPro Tip indicates that GDS is quickly burning through cash, which underscores the importance of the company's focus on capital expenditure management and FCF improvement.
Despite these challenges, GDS has shown strong market performance, with a 99.68% price total return over the past six months and a 69.28% return over the last year. This aligns with the InvestingPro Tip noting that GDS is a prominent player in the IT Services industry.
For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips on GDS Holdings, providing a deeper understanding of the company's financial health and market position.
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