VNET Group, Inc. Sponsored ADR (VNET) AI Stock Analysis

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VNET Group, Inc. Sponsored ADR

(NASDAQ:VNET)

58Neutral

VNET's overall stock score indicates a moderate outlook. The company shows promising revenue and profitability growth, particularly in its wholesale business. However, high leverage, negative free cash flow, and valuation concerns weigh on the score. Technical indicators are mixed, with some bearish signals, while the earnings call provides optimism for future growth, albeit with noted risks in cost management and potential supply shortages.

Positive Factors

Business Expansion

Analyst reiterates a Buy rating on VNET given growth acceleration on rapid wholesale business expansion driven by AI demand.

Capacity Expansion

Management guided a much higher wholesale capacity delivery target of 400-450MW, significantly higher compared to the previous year.

Growth Outlook

Strong wholesale IDC demand driven by AI and rapid client move-in pace supports VNET’s growth outlook.

Negative Factors

Capital Expenditure

VNET is expected to support its capital expenditure with a mix of cash on hand, operating cash flow, project monetization, and domestic debt financing.

Debt Financing

VNET announced offering of US$430mn convertible senior notes to fund its wholesale capacity expansion.

Retail Business Recovery

Rising demand from SMEs for private deployment is expected to boost retail IDC business recovery, with revenue projected to recover 6% year-over-year.

VNET Group, Inc. Sponsored ADR (VNET) vs. S&P 500 (SPY)

Market Cap

$1.72B

Dividend YieldN/A

Average Volume (3M)8.92M

Price to Earnings (P/E)77.4

Beta (1Y)1.07

Revenue Growth9.68%

EPS GrowthN/A

CountryUS

Employees2,581

SectorTechnology

Sector Strength65

IndustryInformation Technology Services

Share Statistics

EPS (TTM)0.08

Shares Outstanding261,995,270

10 Day Avg. Volume7,109,930

30 Day Avg. Volume8,921,244

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.00

Price to Cash Flow (P/CF)0.00

P/FCF Ratio0.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$17.46

Price Target Upside178.47% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering6

VNET Group, Inc. Sponsored ADR Business Overview & Revenue Model

Company DescriptionVNET Group, Inc., an investment holding company, provides hosting and related services in China. It offers managed hosting services consisting of managed retail services, such as colocation services that dedicate data center space to house customers' servers and networking equipment, as well as allow customers to lease partial or entire cabinets for their servers; server administration services; interconnectivity services that allow customers to connect their servers; value-added services, including hybrid IT, bare metal, firewall, server load balancing, data backup and recovery, data center management, server management, and backup server services; cloud services that allow customers to run applications over the internet using IT infrastructure; VPN Services that extend customers' private networks by setting up connections through the public internet. The company also provides operating system support and assistance with updates, server monitoring, server backup and restoration, server security evaluation, firewall services, and disaster recovery services; site selection, planning, design, and construction services for wholesale and retail data centers. It serves information technology and cloud services, communications and social networking, gaming and entertainment, e-commerce, automobile, financial services, and blue-chip and small-to-mid-sized enterprises; government agencies; individuals; and telecommunication carriers. As of December 31, 2021, it operated 40 self-built data centers and 64 partnered data centers with 78,540 cabinets under management. The company was formerly known as 21Vianet Group, Inc. and changed its name to VNET Group, Inc. in October 2021. VNET Group, Inc. was founded in 1999 and is headquartered in Beijing, the People's Republic of China.

How the Company Makes MoneyVNET Group, Inc. primarily generates revenue through its extensive portfolio of data center services. The company's core revenue streams include fees from colocation services, where clients pay for space, power, and cooling to house their servers and IT equipment. VNET also earns income from managed network services, offering secure and reliable connectivity solutions. Another significant revenue stream is its cloud services, where the company provides scalable and flexible cloud infrastructure and solutions. VNET's earnings are further bolstered by strategic partnerships with technology firms and service providers, enhancing its service offerings and expanding its market reach.

VNET Group, Inc. Sponsored ADR Financial Statement Overview

Summary

VNET shows improved profitability and revenue growth in 2024, with a return to net profitability and better cost management. However, high leverage and negative free cash flow persist, posing risks to financial stability.

Income Statement

Positive

VNET has shown a significant improvement in its financial performance for 2024, with a substantial increase in revenue and a return to net profitability. The gross profit margin improved, and the EBIT margin turned positive, indicating better cost management. However, the historical volatility in earnings, particularly the negative EBIT in 2023, suggests some ongoing operational challenges.

Balance Sheet

Neutral

The balance sheet shows a relatively high debt-to-equity ratio, indicating significant leverage. Although there is a positive trend in stockholders' equity, the company remains highly leveraged, which poses a risk. The equity ratio is stable, but the company's liability structure needs to be closely monitored.

Cash Flow

Negative

VNET's cash flow performance is concerning, with free cash flow remaining negative over the years. While there was an improvement in operating cash flow in 2023, the inability to generate positive free cash flow consistently indicates potential liquidity issues. The cash flow to net income ratios highlight inefficiencies in converting earnings into cash.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
8.26B	7.41B	7.07B	6.19B	4.83B
	Gross Profit
1.83B	1.29B	1.36B	1.44B	1.08B
	EBIT
669.44M	-1.97B	166.09M	-261.92M	198.22M
	EBITDA
2.22B	-366.56M	1.72B	1.40B	7.62M
	Net Income Common Stockholders
183.20M	-2.64B	-763.92M	500.10M	-2.69B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
1.49B	2.60B	2.66B	1.37B	3.00B
	Total Assets
32.36B	30.39B	26.95B	23.10B	19.37B
	Total Debt
18.45B	17.17B	14.76B	11.12B	8.25B
	Net Debt
16.96B	14.93B	12.10B	9.75B	5.54B
	Total Liabilities
25.44B	23.87B	19.97B	15.49B	12.48B
	Stockholders Equity
6.37B	6.01B	6.61B	7.24B	6.56B
Cash Flow		Free Cash Flow
0.00	-997.15M	-450.61M	-1.35B	-1.79B
	Operating Cash Flow
0.00	2.06B	2.60B	1.39B	714.24M
	Investing Cash Flow
0.00	-3.91B	-3.56B	-3.77B	-3.89B
	Financing Cash Flow
0.00	3.94B	2.14B	967.58M	4.16B

VNET Group, Inc. Sponsored ADR Technical Analysis

Technical Analysis Sentiment

Positive

Last Price6.27

Price Trends

50DMA

8.73

Negative

100DMA

7.52

Negative

200DMA

5.27

Positive

Market Momentum

MACD

-0.69

Negative

RSI

47.00

Neutral

STOCH

83.77

Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For VNET, the sentiment is Positive. The current price of 6.27 is above the 20-day moving average (MA) of 5.66, below the 50-day MA of 8.73, and above the 200-day MA of 5.27, indicating a neutral trend. The MACD of -0.69 indicates Negative momentum. The RSI at 47.00 is Neutral, neither overbought nor oversold. The STOCH value of 83.77 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for VNET.

VNET Group, Inc. Sponsored ADR Risk Analysis

VNET Group, Inc. Sponsored ADR disclosed 85 risk factors in its most recent earnings report. VNET Group, Inc. Sponsored ADR reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

VNET Group, Inc. Sponsored ADR Peers Comparison

Overall Rating

UnderperformOutperform

Sector (59)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
SWI	68 Neutral	$3.20B	28.86	7.87%	―	5.03%	―
NABL	68 Neutral	$1.34B	42.85	4.21%	―	10.49%	30.42%
TDC	64 Neutral	$2.08B	18.56	85.07%	―	-4.53%	93.29%
DOCN	61 Neutral	$2.84B	35.54	-41.63%	―	12.66%	2097.85%
ZETA	61 Neutral	$3.10B	―	-16.28%	―	38.02%	66.18%
Sector *	59 Neutral	$10.75B	10.37	-6.64%	3.00%	7.30%	-12.02%
VNET	58 Neutral	$1.72B	77.41	2.99%	―	9.68%	―

* Technology Sector Average

Performance Comparison

VNET

VNET Group, Inc. Sponsored ADR

6.27

4.36

228.27%

TDC

Teradata

21.64

-15.60

-41.89%

SWI

SolarWinds

18.49

6.79

58.03%

DOCN

DigitalOcean Holdings

31.48

-2.76

-8.06%

ZETA

Zeta Global Holdings Corp

13.49

0.67

5.23%

NABL

N-able

7.07

-5.50

-43.75%

VNET Group, Inc. Sponsored ADR Earnings Call Summary

Earnings Call Date:Mar 12, 2025

(Q4-2024)

% Change Since: -47.36%|

Next Earnings Date:May 27, 2025

Earnings Call Sentiment Positive

The earnings call highlighted significant growth in the wholesale business and strong financial performance, with promising market prospects for 2025. However, there are challenges in cost management and potential supply shortages that need to be addressed.

Q4-2024 Updates

Positive Updates

Wholesale Business Growth

Wholesale capacity in service increased significantly, rising by 127 megawatts quarter-over-quarter to 486 megawatts. Wholesale capacity utilized reached 353 megawatts, increasing by 73 megawatts quarter-over-quarter. Revenue from the wholesale business reached RMB665 million for the quarter, representing a year-over-year growth rate of 125.4%.

Record Financial Performance

Net revenue increased by 18.3% year-over-year to RMB2.25 billion for the fourth quarter. Adjusted EBITDA for the fourth quarter increased by 63.8% year-over-year to RMB721.3 million. The full year net profit was RMB248 million, marking a turnaround from a net loss in 2023.

Strong Order Wins

Secured a total of 252.5 megawatts in orders from customers across various industries. Notably, a 32 megawatts order from an existing Internet customer, and a 64 megawatts wholesale order from an Internet customer in Hebei Province.

Positive Market Outlook for 2025

Expected total net revenues for 2025 to be between RMB9.1 billion to RMB9.3 billion, representing year-over-year growth of 10% to 13%. Adjusted EBITDA is expected to grow by 15% to 18%.

ESG Recognition

Received a spot in the S&P Global Sustainability Yearbook 2025 with a record score of 70, and received an A rating from MSCI for the third consecutive year.

Negative Updates

Challenges with Cost Management

The wholesale business utilization rate decreased slightly to 72.6% due to concentrated delivery in the fourth quarter of 2024. CapEx for 2025 is expected to be significantly higher, in the range of RMB10 billion to RMB12 billion.

Potential Supply Shortages

Industry research suggests that Tier 1 cities with wider digital economies may begin experiencing supply shortages of high-performance data centers needed to run AI applications as early as 2025.

Company Guidance

During the VNET Group Incorporated's fourth quarter and full year 2024 earnings call, the company reported several key metrics and achievements. The wholesale business showed remarkable growth, delivering a significant increase in net revenue and adjusted EBITDA which surpassed previous guidance. Specifically, net revenue rose by 18.3% year-over-year to RMB2.25 billion for the fourth quarter, with wholesale business revenue reaching a record RMB665 million, marking a 125.4% year-over-year growth. Adjusted EBITDA for the quarter increased by 63.8% to RMB721.3 million, with a margin rise to 32.1%. For the full year, net revenue stood at RMB8.26 billion, up 11.4%, and adjusted EBITDA reached RMB2.43 billion, up 19.1%, alongside a net profit of RMB248 million, reversing a net loss in 2023. The company secured substantial orders totaling 252.5 megawatts from various industries and expects 2025 net revenues to be between RMB9.1 billion and RMB9.3 billion, with adjusted EBITDA between RMB2.7 billion and RMB2.76 billion. Capital expenditures for 2025 are projected to reach RMB10 billion to RMB12 billion, a significant increase, with plans to deliver 400 to 450 megawatts of capacity, indicating robust growth expectations driven by continued strong demand in the IDC market, especially from AI developments.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.