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On Tuesday, RBC Capital Markets adjusted its stance on GDS Holdings (NASDAQ:GDS), a leading developer and operator of high-performance data centers in China. The firm’s analyst, Jonathan Atkin, changed the stock rating from Outperform to Sector Perform, despite increasing the price target from $26.00 to $37.00. The revision was prompted by the stock’s robust performance this year, with InvestingPro data showing an impressive 66.58% YTD return and a remarkable 463.82% gain over the past year. According to InvestingPro’s Fair Value analysis, the stock appears to be fairly valued at current levels.
Atkin acknowledged the growth in GDS Holdings’ core business in China, noting a recent surge in capacity demand from domestic hyperscalers for their ongoing expansion and artificial intelligence (AI) projects. This demand spike has been observed over the past month, signaling a strong operational environment for the company. InvestingPro data reveals the company’s revenue grew by 11.95% in the last twelve months, though it operates with a significant debt burden - one of several key insights available in the comprehensive Pro Research Report.
In addition to the domestic market, RBC Capital has revised its international valuation assumptions for GDS Holdings. The firm now estimates $1.5 million in EBITDA per megawatt for DayOne’s committed capacity, a significant increase from the previous assumption of $1.0 million. This adjustment reflects a more optimistic outlook on the company’s earnings potential from its international operations.
Despite the positive operational prospects and the higher price target, RBC Capital’s downgrade to Sector Perform reflects a belief that GDS Holdings’ shares are now fairly valued. The analyst’s commentary suggests that while the company is performing well operationally, the current stock price adequately reflects this, leading to the neutral rating.
Investors and market watchers will likely monitor GDS Holdings’ performance closely, given the heightened interest from domestic hyperscalers and the company’s revised international revenue projections. With the stock already having experienced significant gains, the market’s reaction to RBC Capital’s updated analysis will be of particular interest.
In other recent news, GDS Holdings has seen several significant developments. Jefferies analyst Edison Lee downgraded the stock from "Buy" to "Hold," setting a new price target of $45, reflecting a more cautious outlook despite a positive industry growth forecast. Conversely, Raymond (NSE:RYMD) James analyst Frank Louthan raised GDS Holdings’ price target to $53 while maintaining an "Outperform" rating, citing potential growth at DayOne, a data center platform partly owned by GDS. Meanwhile, Morgan Stanley (NYSE:MS) reiterated an "Overweight" rating with a $39 price target, emphasizing the impact of Alibaba (NYSE:BABA)’s upcoming earnings on GDS’s growth prospects.
TD Cowen also adjusted its price target for GDS Holdings to $39, maintaining a "Buy" rating, and anticipates that the company will exceed Wall Street’s expectations in its fourth-quarter results. The firm expects GDS to present an optimistic 2025 guidance in terms of revenue and EBITDA. Additionally, GDS Holdings reported a record number of Gross Organic Tier 1 Installs in the third quarter, driven by AI-related demand, although the fourth-quarter leasing figures are expected to decrease. The company remains confident in achieving its installation targets for 2024, with a strong sales pipeline supported by 431 megawatts of total customer commitments.
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