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Jefferies raises VNET stock target, maintains buy rating

EditorAhmed Abdulazez Abdulkadir
Published 31/05/2024, 02:54 am
VNET
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On Thursday, Jefferies maintained its Buy rating on VNET Group Inc (NASDAQ:VNET) and increased the price target to $6.69 from the previous $6.53. The firm's assessment follows VNET's first-quarter 2024 performance, where the company reported approximately 5% year-over-year revenue growth and a 3% decrease in adjusted EBITDA. The results showed revenues slightly below Jefferies' and consensus estimates by about 1%, while EBITDA was in line with expectations.

VNET Group reiterated its full-year 2024 guidance, anticipating around 7% growth in revenue and 10% in EBITDA. The company has also begun sharing revenue and operating metrics separately for its retail and wholesale data center businesses. The wholesale segment displayed a significant 59% year-over-year revenue increase in the first quarter of 2024, contrasting with a 7% decline in the retail segment.

The report highlighted that although VNET's wholesale pricing is not as high as that of competitors like GDS and CD, the estimated leveraged internal rate of return (IRR) for VNET is at 12%, compared to the weighted average cost of capital (WACC) of 8%. Jefferies analysts find the stock's valuation, at 0.7 times enterprise value to invested capital (EV/IC), to be highly attractive, suggesting a strong investment potential for the company's shares.

VNET Group's strategic focus on its wholesale data center operations appears to be paying off, as evidenced by the robust growth in that sector. The company's commitment to its guidance for the year suggests confidence in its business model and growth trajectory. The updated price target reflects Jefferies' positive outlook on the stock's future performance.

InvestingPro Insights

With VNET Group Inc's (NASDAQ:VNET) first-quarter 2024 results in the spotlight, insights from InvestingPro provide a deeper understanding of the company's financial health and market position. VNET operates with a significant debt burden, which is an important consideration for investors. Despite this, the company is trading at a low Price / Book multiple of 0.58, as of the last twelve months ending Q4 2023, suggesting that the stock may be undervalued relative to its assets. Additionally, analysts predict the company will be profitable this year, which could signal a turnaround from its non-profitable status over the previous twelve months.

InvestingPro data shows a market capitalization of $479.04 million, indicating the size and scale of VNET within the IT Services industry. The company's revenue growth of nearly 5% year-over-year aligns with the figures reported in the quarterly performance, reinforcing the company's steady growth narrative. Moreover, VNET's stock has experienced a strong return over the last three months, with a price total return of 17.42%, which could interest investors looking for recent positive momentum.

For those considering an investment in VNET, there are additional InvestingPro Tips available that provide further insights into the company's financial metrics and market behavior. With an exclusive offer for our readers, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, where you can access comprehensive analysis and over a dozen more tips to inform your investment decisions.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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