GDS Holdings (GDS, Financial) shares experienced a significant decline of 16.22% following the announcement of higher than anticipated capital expenditures. The unexpected increase in spending plans overshadowed the company's stronger-than-expected third-quarter earnings performance, prompting investor concerns.
From a financial standpoint, GDS Holdings reported a notable 18% increase in revenue year-over-year for the third quarter, totaling 2.97 billion yuan ($410 million). This revenue figure was slightly below the analyst estimate of $413 million. However, the company managed to reduce its net loss to just under $28 million, or $0.02 per share, outperforming the anticipated loss of $0.19 per share, showcasing an improvement from the nearly $60 million loss reported a year ago.
GDS Holdings continues to forecast its full-year 2024 revenue in the range of $1.57 billion to $1.62 billion, with adjusted EBITDA expected between $684 million and $711 million. Notably, the company has revised its capital expenditure projection significantly upwards, from a former $898 million to $1.52 billion for the year.
In terms of valuation, GDS Holdings' current market capitalization stands at $3.83 billion, with a price-to-book ratio of 1.8, indicating a valuation close to its intrinsic worth. The company is presently assessed as "Fairly Valued" according to its GF Value assessment. Despite the decline in stock price, GDS Holdings holds a positive GF Score of 75, reflecting its potential amidst financial challenges.
GDS Holdings operates predominantly within China and has been expanding its data center presence across Southeast Asia. Concerns remain over its financial strength, highlighted by a poor Altman Z-score of 0.28, indicating potential distress. The company's interest coverage ratio of 0.37 further underscores potential financing challenges, particularly with the increased capital expenditure forecast.
Overall, while GDS Holdings (GDS, Financial) is experiencing growth in revenue and improvements in net loss, significant challenges persist due to high debt levels and escalating capital expenses, factors investors should closely monitor moving forward.
