01. IHS Holding Limited (NYSE:IHS)
Upside Potential: 129.80%
Latest Average Share Price Target: $7.10
IHS Holding Limited (NYSE:IHS) is a prominent player in the global data center industry, making it a strong candidate for inclusion in our list of eleven best data center stocks to buy according to analysts. As a developer, owner, and operator of communications infrastructure, IHS Holding Limited (NYSE:IHS) offers critical services in Sub-Saharan Africa, the Middle East, North Africa, and Latin America, supporting mobile network operators and internet service providers. Its shared infrastructure solutions, such as colocation, fiber connectivity, and rural telephony, position it as an essential partner in delivering data center services that facilitate connectivity and digital inclusion.
In its Q2 2024 earnings report, IHS Holding Limited (NYSE:IHS) demonstrated robust operational performance despite macroeconomic challenges, particularly the devaluation of the Nigerian Naira. The company reported a revenue increase of 4% quarter-over-quarter and a 35% rise in adjusted EBITDA, reflecting strong organic growth and efficient cost management. Notably, the company’s adjusted EBITDA margin improved to 57.6%, a significant year-over-year improvement.
One of the key drivers of IHS Holding Limited (NYSE:IHS) growth is its long-term partnerships, particularly with MTN, a major telecom provider. IHS Holding Limited (NYSE:IHS) recently renewed and extended its contracts with MTN in Nigeria and across multiple African countries, securing nearly $12.3 billion in contracted revenues with an average tenant term of over eight years. These contracts ensure a steady stream of revenue, providing the company with financial stability and operational predictability. Moreover, the introduction of power indexation in Nigeria helps mitigate the impact of fluctuations in diesel prices and currency exchange rates, further de-risking the business model.
While the Naira devaluation led to a 20% decline in reported revenue year-over-year, IHS Holding Limited (NYSE:IHS) underlying business remains strong, driven by a 69.3% organic growth rate, fueled by foreign exchange resets and CPI escalations. The company’s focus on reducing capital expenditures by 73% and improving cash flow generation also strengthens its financial position. With a consolidated net leverage ratio of 3.9x and a strategic review aimed at unlocking shareholder value, IHS Holding Limited (NYSE:IHS) is well-positioned for continued growth in the data center sector. Its solid fundamentals, long-term contracts, and focus on operational efficiencies make it a compelling investment choice.
While we acknowledge the potential of IHS to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than IHS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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