Shares of Nebius Group N.V. (NASDAQ:NBIS) are rising Thursday. Morgan Stanley initiated coverage on the AI infrastructure stock.
Nebius Group stock is building positive momentum. What’s pushing NBIS stock higher?
Morgan Stanley Analysts See Upside
Analyst Josh Baer initiated an equal-weight rating and set a price target of $126.00. Baer highlighted the company’s aggressive scaling targets and its strategic positioning within the AI infrastructure sector as pivotal factors, pointing to a potential 23.55% upside. The ambitious plan to expand capacity and capture significant annual recurring revenue (ARR) by 2026 underpins this valuation, but also presents substantial execution risks.
Scaling the AI Frontier: Nebius’s Ambitious Growth Path
Nebius Group’s strategy revolves around its AI cloud infrastructure, aiming to connect a staggering 700MW of power by 2026. This bold move is expected to generate between $7 billion and $9 billion in ARR by the fourth quarter of 2026, a significant leap from its current $600 million ARR.
“We see Nebius well positioned to bring online significant capacity, scale rapidly, and long-term, we think Nebius can inflect margins and FCF meaningfully positive,” Morgan Stanley said.
The firm’s ability to meet these targets will be crucial in justifying the current stock valuation and supporting the projected price target.
Financial Health And Strategic Investments
Nebius’s financial strategy is bolstered by its diverse customer base and its investments in non-core consolidated businesses. These elements are expected to provide additional streams of revenue and strategic value beyond its primary AI compute services.
The company’s focus on maintaining a solid balance sheet and accessing capital efficiently plays a critical role in supporting its aggressive expansion plans.
Challenges And Execution Risks
While Nebius’s growth prospects are compelling, they come with considerable risks, primarily around the execution of its scaling strategy. The necessity to ramp up capacity significantly and the associated capital expenditures pose potential challenges to achieving profitability in the near term.
Morgan Stanley pointed out that the company’s EBIT margins are likely to remain under pressure due to ramping depreciation and substantial capex requirements.
Nebius Shares Climb
NBIS Price Action: Nebius Group shares were up 2.07% at $104.10 at the time of writing on Thursday, according to Benzinga Pro data.
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