Nebius Group N.V. (NASDAQ:NBIS): An Tale of an Attractive Carve-Out

We came across a bullish thesis on Nebius Group N.V. (NASDAQ:NBIS) on ValueInvestorsClub by yarak775. In this article, we will summarize the bulls’ thesis on NBIS. The company’s shares were trading at $17.83 when this thesis was published, vs. the closing price of $31.54 on Jan 07.

A computer screen showcasing Artificial Intelligence and Machine Learning algorithms at work.

Nebius Group N.V. operates as a technology company that engages in building full-stack infrastructure to service the global AI industry. Its businesses include Nebius, an AI-centric cloud platform built for intensive AI workloads.

The fact that the CEO did not liquidate its ex-Russia assets after getting delisted (as Yandex) from NASDAQ offers a long-term investment rationale. These assets include data center business for AI and ML workloads, Edtech platform and autonomous driving platform. The data center business located in Finland is the core focus of this thesis. The cold climate and cheap energy availability make it cost-efficient. NBIS has the scale and expertise, drawing interest from big firms like Nvidia that want to diversify away from Coreweave. Revenue is expected to increase fivefold, with adjusted EBITDA turning green in 2025.

A more realistic case would assume a GPU capacity that is expected to triple. NBIS is expected to realize an annual recurring revenue of $500 million-$1 billion. In a bull case, the EBITDA is projected to be $750 million. Applying a multiple of 10x, the intrinsic value per share comes to $30, almost equal to the current market price. The exercise price for stock options granted to employees is $40, implying that the potential for growth is much higher than the recurring revenue assumed in the model. The Edtech and autonomous driving platforms also offer incremental value. The $2.3 billion in cash and no debt offers enough leeway for capex and should enable the company to tide over a year of negative EBITDA. The market will closely follow the future earnings call and will seek more clarity from these investor engagements.

While we acknowledge the potential of NBIS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NBIS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.