VNET Group shares fall 44% after InvestingPro’s overvalued warning

In February 2025, InvestingPro’s Fair Value models identified (NASDAQ:VNET) as significantly overvalued at $8.94 per share. This analysis proved remarkably accurate, as the stock has since declined to $5.02, delivering a 44% return for investors who acted on the bearish signal. The success demonstrates the power of comprehensive valuation analysis in identifying market mispricings. Investors seeking similar opportunities can explore current overvalued stocks on our Most overvalued list.

VNET Group, a leading carrier-neutral data center service provider in China, had shown strong momentum prior to the overvaluation signal, with its shares rising nearly 70% in the preceding month. Despite positive fundamentals, including $1.13 billion in revenue and $303.5 million in EBITDA, InvestingPro’s models indicated the stock had moved well beyond its intrinsic value.

The Fair Value analysis estimated a target price of $4.99, suggesting a potential downside of 34.8% from the February price of $8.94. Within two months, the stock declined sharply, validating the model’s projection. This successful call was particularly noteworthy given that it came amid positive news flow, including a Moody’s rating upgrade and strong revenue performance in Q4 2024.

Recent developments have supported the original thesis. While Citi maintains a buy rating with a $20 target, the stock’s rapid decline suggests the market has recognized the previous overvaluation. The company’s fundamental health score of 2.45 indicates stable operations, despite the price correction.

InvestingPro’s Fair Value methodology combines multiple valuation approaches, including discounted cash flow analysis, comparable company metrics, and market sentiment indicators. This comprehensive framework helps investors identify both overvalued and undervalued opportunities before the broader market recognizes the mispricing.

For investors seeking to enhance their investment decision-making with similar analytical tools, InvestingPro offers access to Fair Value analyses, financial health scores, and real-time valuation metrics across thousands of stocks. The platform’s track record in identifying opportunities like VNET demonstrates its value for both long and short-term investors looking to make more informed investment decisions.