Last Update 27 Nov 25
NB2: Further Management Changes And Upgrades Will Drive Resilience In Uncertain Markets
Northern Data's analyst price target has shifted significantly lower, with recent updates reflecting a new target around EUR 15 to EUR 27, down from previous highs near EUR 40, as analysts cite revised expectations for company growth and profitability.
Analyst Commentary
Recent analyst updates for Northern Data reflect a nuanced outlook that balances optimism with caution. Analysts broadly recognize both the company's potential and the challenges that may impact its valuation and shareholder returns.
Bullish Takeaways
- Bullish analysts highlight continued confidence in Northern Data's long-term growth potential. Some are maintaining Buy ratings despite recent price target reductions.
- The company is seen as well-positioned in its sector, with strategic initiatives expected to support expansion over time.
- Valuation, even after downward revisions, is viewed by some as reasonable considering the company's evolving market opportunities.
Bearish Takeaways
- Bearish analysts cite a more conservative view on profitability growth, which has led to the reduction of price targets across the board.
- There is heightened caution about execution risks, particularly as expectations for future earnings are recalibrated.
- Some analysts have shifted to a neutral stance, reflecting uncertainty around the company's near-term ability to deliver significant shareholder returns.
- Revised targets indicate lower confidence in the pace and scale of upcoming growth compared to earlier forecasts.
What's in the News
- Northern Data AG has withdrawn its full-year 2025 financial guidance. This decision comes as the company continues to evaluate strategic transactions and navigate shifting GPU market pricing. The impact from these factors is partially offset by increased GPU utilization following a major technology upgrade (Key Developments).
- John Hoffman will join the Management Board and serve as co-CEO alongside Aroosh Thillainathan, beginning 22 September 2025. He brings nearly two decades of capital markets and technology experience to the role (Key Developments).
- Northern Data AG was recently dropped from the S&P Global BMI Index (Key Developments).
Valuation Changes
- Fair Value estimate remains unchanged at €31.6, reflecting stable fundamental outlook from recent analysis.
- Discount Rate has risen slightly from 7.84% to 8.09%, indicating a marginally higher perceived risk or required return by analysts.
- Revenue Growth projection is unchanged at 39.73%, suggesting steady expectations for topline expansion.
- Net Profit Margin is virtually flat, moving from 14.52% to 14.52%, showing analysts anticipate similar profitability levels.
- Future P/E ratio has increased slightly from 31.98x to 32.20x, which suggests a modest lift in valuation multiples applied to future earnings.
Key Takeaways
- Strategic expansion into AI and HPC, boosted by partnerships and technology, positions Northern Data to capture revenue growth in the generative AI market.
- Transitioning to carbon-neutral energy and advanced cooling tech may lower costs, while potential asset sales could fund AI-focused reinvestment.
- Dependency on NVIDIA and high capital expenditure pose risks to financial stability, while customer concentration and AI market competition threaten revenue growth and market share.
Catalysts
About Northern Data- Develops and operates high-performance computing (HPC) and artificial intelligence (AI) solutions to businesses and research institutions worldwide.
- Northern Data's expansion into AI and high-performance computing solutions, particularly through Taiga Cloud, positions it to capture a significant share of the booming generative AI market, which could drive substantial revenue growth.
- Their strategic partnership with NVIDIA and the adoption of the latest Grace Blackwell technology enhances their product offerings, potentially improving net margins through cutting-edge solutions and performance efficiencies.
- The company's transition to carbon-neutral energy solutions and proprietary cooling technologies may reduce operational costs, thus positively impacting net margins and overall profitability.
- Northern Data's significant GPU acquisition and deployment plans are likely to support further revenue and earnings growth as they expand customer capacity and utilization.
- The potential sale of the Peak Mining business could unlock capital, allowing for reinvestment into the AI-focused segments, thereby enhancing revenue and supporting strategic growth initiatives in high-margin areas.
Northern Data Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Northern Data's revenue will grow by 42.0% annually over the next 3 years.
- Analysts are not forecasting that Northern Data will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Northern Data's profit margin will increase from -63.6% to the average DE Software industry of 12.2% in 3 years.
- If Northern Data's profit margin were to converge on the industry average, you could expect earnings to reach €70.0 million (and earnings per share of €1.09) by about September 2028, up from €-127.4 million today.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 41.9x on those 2028 earnings, up from -8.4x today. This future PE is greater than the current PE for the DE Software industry at 33.2x.
- Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 7.82%, as per the Simply Wall St company report.
Northern Data Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The company's reliance on NVIDIA technology means that any delays or issues in GPU supply could impact Northern Data's ability to expand its AI infrastructure, potentially affecting future revenue growth.
- The ongoing process of selling the Peak Mining business introduces uncertainty about future financial stability and may impact cash flow and profitability until the sale is completed.
- The high capital expenditure involved in expanding data center capacity and acquiring new GPUs could strain cash reserves and increase financial risk if the expected returns from these investments do not materialize as anticipated, impacting net margins.
- Customer base concentration, with revenue growth primarily reliant on expanding relationships with existing clients, increases the risk of revenue volatility if there is any change in demand or satisfaction from these key clients.
- The rapidly evolving AI market poses a competitive threat, and the emergence of new players in the European AI infrastructure space could lead to increased pricing pressure and impact Northern Data’s market share and earnings.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of €36.6 for Northern Data based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €43.0, and the most bearish reporting a price target of just €27.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €573.0 million, earnings will come to €70.0 million, and it would be trading on a PE ratio of 41.9x, assuming you use a discount rate of 7.8%.
- Given the current share price of €16.72, the analyst price target of €36.6 is 54.3% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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