By Sam Boughedda
Investing.com — VNET Group Inc DRC (NASDAQ: VNET ) 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.
Add Chart to Comment
We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
- Enrich the conversation
- Stay focused and on track. Only post material that’s relevant to the topic being discussed.
- Be respectful. Even negative opinions can be framed positively and diplomatically.
- Use standard writing style. Include punctuation and upper and lower cases.
- NOTE: Spam and/or promotional messages and links within a comment will be removed
- Avoid profanity, slander or personal attacks directed at an author or another user.
- Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
- Only English comments will be allowed.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.