Nebius Group (NASDAQ:NBIS) stock has plunged into a bear market, moving from the year-to-date high of $300 to $187, mirroring the performance of other neocloud companies like IREN (NASDAQ:IREN) and CoreWeave (NASDAQ:CRWV). This retreat will be put to the test as it releases its financial results.
Investors are Shorting Nebius Group Stock
There are signs that many investors are increasingly shorting Nebius Group shares despite its strong revenue growth amid the AI boom.
One reason for this is the recent reports that Meta Platforms (NASDAQ:META), its biggest client, is now turning into a competitor. Meta is considering leasing its extra computing power to other companies, a move that will lead to billions of dollars in revenue.
Other companies are entering the industry. SpaceX (NASDAQ:SPCX) has already received large orders from companies like Google, Reflection AI, and Anthropic. Most Bitcoin (CRYPTO: BTC) mining companies have also moved to the industry.
There are also concerns about its surging capital expenditures, which will lead to more debt and potential shareholder dilution. Its debt has already jumped in the past few months, while the company has hinted that it may use its ATM to raise cash.
The cost of doing business continues to rise, with the prices of most items like GPUs, servers, and memory going parabolic. These concerns explain why its short interest has jumped to 27%, much higher than CoreWeave’s 15%. This figure means that many investors are placing short trades on the company.
Nebius Results to Show That Revenue Jumped
Analysts are optimistic that Nebius Group’s revenue continued soaring in the last quarter. The average estimate is that its revenue jumped by 446% to $574 million in the second quarter as it continued to monetize its data centers.
Its last results showed that its revenue jumped by 684% in the first quarter to $399 million, with its annualized run-rate hitting $1.92 billion. It also made a $113 million loss during the quarter.
Analysts tracking the company also expects the results to show that its earnings per share dropped from $2.45 to a 86 cents loss. Nebius has missed its EPS estimates two times in the last four earnings cycles, meaning that a miss is still possible.
Analysts have a bullish outlook for the company. Citigroup recently slashed the target from $287 to $278, while Piper Sandler initiated with a neutral target of $224. Northland Securities and Bank of America have a buy rating with targets of $410 and $280, respectively.
The options market prices in a 13% move after its earnings on August 12. It has an implied volatility of 120%, with the volume-based put/call option ratio falling to 0.77, a sign that it may rebound.
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