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On Tuesday, Jefferies analyst Edison Lee upgraded GDS Holdings (NASDAQ:GDS) stock rating from Hold to Buy, setting a new price target of $45.00. Despite the stock’s recent volatility, with shares down 8.6% in the past week, GDS has shown remarkable strength with a 362% return over the past year. According to InvestingPro data, the company maintains a Fair market health score, though current valuations suggest the stock may be trading above its Fair Value.
Lee’s analysis suggests that the market’s concerns may be overstated, as GDS Holdings’ strategy in China continues to focus on de-leveraging. The analyst pointed out that a significant capital expenditure (capex) increase is not anticipated in the upcoming financial results. InvestingPro data reveals the company operates with a debt-to-equity ratio of 2.73 and maintains a current ratio of 1.19. According to a press report released on the same day, GDS Holdings’ parent company, GDSI, may secure up to $3.4 billion in debt to finance its capex, indicating that fundraising efforts are likely to occur primarily at the GDSI level.
In the previous week, GDS Holdings successfully raised RMB 1.2 billion through a pre-REIT (Real Estate Investment Trust) transaction. This move further supports the notion that the company is securing funds through means other than an equity raise, which might have been a concern for investors.
Lee’s upgrade to a Buy rating reflects a positive outlook on GDS Holdings’ financial strategy and its ability to manage capital raising without significantly diluting shareholder value. The new price target of $45.00 represents a reassessment of the company’s value in light of these developments and Jefferies’ confidence in the firm’s financial approach.
In other recent news, GDS Holdings has announced a private REIT deal valued at Rmb2.9 billion, which involves selling a 70% interest and deconsolidating Rmb1.2 billion in debt from its balance sheet. This transaction is expected to be finalized within the next three months and could significantly impact the company’s financial leverage. In analyst updates, Morgan Stanley (NYSE:MS) reaffirmed its Overweight rating with a $39 price target, while RBC Capital Markets downgraded the stock from Outperform to Sector Perform, despite raising the price target to $37. RBC Capital noted strong demand from domestic hyperscalers and adjusted international revenue projections. Meanwhile, Jefferies downgraded GDS Holdings from Buy to Hold, setting a new price target of $45, citing anticipated growth in AI capital expenditures in China. Raymond (NSE:RYMD) James, however, raised its price target to $53, maintaining an Outperform rating, pointing to potential growth at DayOne, a data center platform in which GDS has invested. These developments indicate a mix of cautious optimism and strategic adjustments among analysts regarding GDS Holdings’ future prospects.
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