VNET Group (NasdaqGS:VNET): Assessing Valuation Following Major 40MW Data Center Order in Beijing

If you are wondering what’s behind the sudden action in VNET Group (NasdaqGS:VNET) shares this week, look no further than the company’s latest deal. VNET just announced a massive 40MW wholesale order from a top internet company for its Gu'an IDC Campus near Beijing. This is a clear signal that demand for its premium data center services, especially those tied to emerging AI and high-performance computing, is heating up in the region.

This headline comes as VNET Group has delivered impressive results for shareholders, with shares jumping 19% over the past month and up a whopping 168% in the past year. The trend has been bolstered by growing revenue, up 13% annually, and even stronger net income growth as VNET rolls out projects aimed at meeting surging technology needs in China. Momentum is clearly building, and this wholesale order adds another layer to that story.

After such a rally, the big question is whether VNET Group is still an attractive buy, or if the market has already factored in its growth trajectory. Could there be more upside left, or are investors chasing after last year’s gains?

Most Popular Narrative: 30.5% Undervalued

According to the most widely followed narrative, VNET Group is significantly undervalued based on its growth outlook and projected financial performance. This perspective weighs multiple factors, including robust sector demand, innovative expansion strategies, and ambitious profit growth targets, to estimate the company’s fair value well above current market prices.

Strong, sustained growth in wholesale data center capacity utilization and demand, especially for AI-driven workloads in regions like Greater Beijing and Yangtze River Delta, positions VNET to benefit from the accelerating digitalization and increased AI/cloud adoption across China. This directly supports higher future revenues and occupancy rates. VNET's rapid delivery and scalable modular construction technology (Hyperscale 2.0 framework) shortens build cycles and enables swift response to AI and cloud customer needs. This allows for faster order fulfillment and improved revenue realization, while also driving cost efficiency gains that enhance EBITDA margins.

Want to uncover the driving force behind this undervaluation? There is a bold set of growth projections and a margin play at work here. Could this company’s future profit multiple break out of the ordinary? Find out which headline numbers underpin the narrative’s bullish price target and why the market might be missing the bigger story.

Result: Fair Value of $13.46 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent high debt levels and the potential for slower AI-driven demand could quickly alter the bullish outlook for VNET Group.

Find out about the key risks to this VNET Group narrative.

Another View: Our SWS DCF Model Says Otherwise

While analyst price targets point to strong upside, our SWS DCF model tells a cautionary tale. It suggests the stock is actually overvalued based on a detailed cash flow forecast. Which approach will prove more accurate over time?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out VNET Group for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own VNET Group Narrative

If the analysis so far does not match your own perspective, or you prefer diving into the numbers yourself, you can build a narrative in just a few minutes using Do it your way.

A great starting point for your VNET Group research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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