VNET Group (NASDAQ: VNET) surged 7.93% in pre-market trading on Tuesday, as investors reacted positively to a recent valuation analysis suggesting the stock could be significantly undervalued.
According to a discounted cash flow (DCF) model analysis by Simply Wall St, VNET Group's fair value estimate stands at $16.60 per share, implying a potential upside of around 30% from the current share price of $11.54. The report highlighted VNET's expected transition to profitability next year and opportunities for growth as key drivers for the higher valuation.
However, the analysis also noted some weaknesses, including high debt levels and a relatively short cash runway based on current free cash flow. Despite these concerns, the overall assessment painted an optimistic picture for VNET Group's prospects, fueling investor enthusiasm and contributing to the stock's pre-market rally.