It’s safe to say that VNET Group (VNET) investors have not had much to shout about in 2023. Since the turn of the year, the shares have shed 51% of their value.
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That said, the Chinese network services specialist is definitely getting the thumbs up from Singapore banking giant DBS, which believes the stock is significantly undervalued.
Along with a Buy rating, DBS has a $7.10 price target for VNET shares, suggesting they have room to post growth of a big 153% over the coming year.
So, what is it about VNET that has DBS offering such a confident take?
Founded in 1999, VNET started the first carrier-neutral data center in China, where the data centre market is dominated by three telecom operators. In revenue terms, these account for roughly 50% of the country’s data centre market. However, the other half consists of carrier-neutral data centre operators, VNET amongst them. Catering to more than 1,400 customers and boasting a 3% share of the China data centre market (as of 2021), DBS notes that VNET is one of the “leading players” in the industry.
Furthermore, the company is set to benefit from increasing data centre demand from numerous sectors. “VNET has a diversified retail customer base across various industries,” says DBS, “and data centre demand has been strong as said customers embark on their digital transformation.”
Moreover, to support the anticipated growth, the company is targeting a meaningful expansion of capacity. To meet the growing need for such services, in FY23, VNET expects to broaden capacity by 8-9k cabinets. Additionally, supported by current retail relationships with wholesale customers, DBS expects the company to “successfully expand” into the wholesale market, and in the future, this should provide “more growth visibility.”
Turning now to the rest of the Street, opinions are split almost evenly. 3 Buys and 2 Holds add up to a Moderate Buy consensus rating. At $6.16, the average price target brings the upside potential to 120%. (See VNET stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investment bank. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
