On Friday, Morgan Stanley (NYSE:) reiterated an Overweight rating on GDS Holdings (NASDAQ:), maintaining a price target of $30.00. The stock, currently trading at $21.23, has shown remarkable volatility with a 245% return over the past year. According to InvestingPro data, GDS is currently fairly valued based on its proprietary Fair Value model. The reaffirmation comes in light of recent developments in U.S. policy regarding artificial intelligence (AI). President Trump has signed an executive order aimed at fostering AI development free of ideological biases, which also involves revoking certain past policies considered to be hindering U.S. AI innovation and leadership.
The executive order, although not specifying the policies to be revoked, paves the way for a new AI strategy to be formulated within 180 days. This task will be undertaken by a select group of technology and science officials. Morgan Stanley sees this policy shift as potentially beneficial for DayOne, a subsidiary of GDS Holdings, particularly in relation to the import of high-end graphics processing units (GPUs) from the U.S.
The new executive order may reduce the likelihood of the U.S. imposing the GPU export quota scheme that was proposed by the Biden Administration 10 days prior. This scheme, had it been implemented, could have restricted ASEAN countries from importing and deploying U.S.-made high-end GPUs.
The analyst from Morgan Stanley believes that the ability for ASEAN countries to continue importing and utilizing these GPUs under the new U.S. AI policy could be advantageous for DayOne. This development is seen as a positive step for GDS Holdings, which operates under the brand name GDS International in the ASEAN region. The company has demonstrated solid revenue growth of ~12% over the last twelve months, though InvestingPro analysis reveals it’s currently operating with a significant debt burden and rapidly burning through cash. Get access to 10+ additional exclusive ProTips and comprehensive financial analysis with an InvestingPro subscription.
The reiteration of the Overweight rating and the $30.00 price target by Morgan Stanley reflects the firm’s outlook on the stock’s potential, in light of the evolving landscape of U.S. AI policy and its implications for GDS Holdings’ operations. With analyst targets ranging from $7.32 to $30.73, and an overall Financial Health score of FAIR from InvestingPro, investors seeking deeper insights can access the comprehensive Pro Research Report, available exclusively to subscribers, which provides detailed analysis of GDS Holdings’ financial position and growth prospects.
In other recent news, GDS Holdings Limited reported a Q3 revenue of RMB2.97 billion ($422.6 million), marking a 17.7% YoY increase, but falling short of the consensus estimate of RMB2.99 billion. The company’s adjusted EBITDA rose by 15% YoY to RMB1.30 billion ($184.6 million), and a net loss of RMB231.1 million ($32.9 million) was reported for Q3, a reduction from a loss of RMB420.8 million in the same period last year. Analysts at Jefferies maintained a Buy rating on GDS Holdings, noting the company’s growth strategy and capital expenditure outlook. The firm’s analysis highlighted GDS Holdings’ confidence in securing 200 megawatts of new orders annually, aiming for a goal of 1 gigawatt by the end of 2027. The company’s management stated that achieving a positive free cash flow by the year 2025 remains a top priority. GDS Holdings also reported a 20.2% YoY increase in the total area committed and pre-committed to 785,692 square meters. The company maintained its full-year 2024 guidance for total revenues of RMB11,340-11,760 million and adjusted EBITDA of RMB4,950-5,150 million. However, GDS Holdings raised its capital expenditure forecast to RMB11,000 million from RMB6,500 million, attributing this to an acceleration of business expansion. These are among the recent developments concerning GDS Holdings.
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