RBC Capital upgrades GDS Holdings stock rating to Outperform on monetization success

Investing.com - RBC Capital upgraded GDS Holdings (NASDAQ:GDS) from Sector Perform to Outperform and raised its price target to $48.00 from $37.00. The data center company, currently trading at $36.87 with a market capitalization of $7.39 billion, has demonstrated remarkable momentum with a 220.89% return over the past year. According to InvestingPro analysis, the stock currently trades at premium valuations with a P/E ratio of 309.46.

The upgrade follows what RBC Capital described as "favorable monetization and valuation marks" achieved through GDS Holdings’ recent asset-backed securities (ABS) and C-REIT transactions.

RBC Capital noted that the C-REIT transaction indicates a high teens EBITDA multiple, which is "significantly higher than the current 12.5x holdco multiple."

The firm identified potential catalysts for share liquidity and valuation improvements should GDS management secure a dual-primary listing in Hong Kong.

RBC Capital’s price target increase to $48.00 reflects updates to its financial model for the data center company.

In other recent news, GDS Holdings announced the successful completion of a $550 million convertible senior notes offering, with the proceeds intended for general corporate purposes, including potential strategic investments and acquisitions. The company also disclosed its latest financial data in a Form 6-K filed with the SEC, which provides insights into its financial health. In a move reflecting confidence in the company’s growth potential, JPMorgan upgraded GDS Holdings’ stock rating to Overweight, citing increased AI demand, and raised the price target to $46. Similarly, TD Cowen reiterated its buy rating with a $38 price target, highlighting the company’s position as a key player in the expanding AI data center market in Asia. However, Jefferies revised its price target for GDS Holdings to $37.32 from $47.76, maintaining a Buy rating despite the adjustment. This revision follows the company’s recent issuance of a $500 million convertible bond and new American Depository Shares, aimed at refinancing existing debt. These developments underscore GDS Holdings’ strategic financial maneuvers and its role in the evolving data center landscape.

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