VNET Tumbles on Goldman Double Downgrade; Jeffries Keeps a Buy

  • by THO
  • 1 week ago
  • news
  • 1

By Sam Boughedda — VNET Group Inc DRC (NASDAQ:) shares tumbled 14.5% Friday following a double downgrade from Goldman Sachs after it reported third quarter earnings on Thursday evening. 

VNET’s report underwhelmed investors and caused worry after comments about regulatory uncertainty and competition despite it beating expectations on both revenue and EPS.

Goldman analyst Tina Hou downgraded the stock to sell from buy, slashing the price target to $11.50 from $32.80.

Hou told investors that the company will struggle to maintain its wholesale customer acquisition and order momentum, with the data center industry experiencing a slowdown.

The Goldman’s analyst also cited potential competitors, stating the internet data center services provider faces heightened competition with new market entrants. Therefore, the competition and regulatory issue is concerning for the analyst, while she also believes the company will fail to meet targets for growth.

However, investment firm Jefferies maintained its buy rating despite the recent sell-off. 

Edison Lee, an analyst at the firm, said that market concerns about VNET are misplaced as retail is a more profitable business than wholesale, and so retail growth is good for the company.

In its Q3 earnings, VNET reported total cabinets under management increased by 2,388, but Lee said investors should not be fixated on the cabinet target numbers set by the company.

Lee maintained a $41.30 price target.

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