In a report released today, Daley Li from Bank of America Securities reiterated a Buy rating on VNET Group, Inc. Sponsored ADR (VNET – Research Report), with a price target of $17.30.
Daley Li has given his Buy rating due to a combination of factors, primarily driven by the strong demand for VNET Group, Inc.’s wholesale internet data center (IDC) services. The company is experiencing significant growth in this area, fueled by the increasing demand for artificial intelligence applications, which is expected to accelerate their revenue and adjusted EBITDA growth. Additionally, VNET has set ambitious targets for expanding its wholesale capacity, planning to deliver between 400-450MW in the fiscal year 2025, a substantial increase from the previous year’s delivery.
Furthermore, VNET’s management has outlined a comprehensive funding strategy to support this expansion, utilizing cash on hand, operating cash flow, and project monetization, among other sources. The company is also well-positioned to benefit from favorable financing conditions through its shareholder, SDHG, which could provide access to low-interest loans. The retail IDC business is also expected to recover, driven by increased demand from small and medium-sized enterprises for private deployments. Overall, these factors contribute to a positive growth outlook for VNET, justifying the Buy rating.
In another report released on March 13, Citi also maintained a Buy rating on the stock with a $20.00 price target.