GDS Holdings Ltd (NASDAQ:GDS) ended the year 2018 on a low note regarding earnings estimates. Notably, the firm reported considerable losses in the third quarter of FY2018. As such, the share price tanked as well as sentiment around the firm’s ability to turn up a profit. However, the firm is rolling out projects in the Kunshan region of the People’s Republic of China in the hope of increasing revenues.
The Kunshan project 100% pre-committed
In particular, GDS Holdings and its subsidiaries develop data centers for hyper-scale customers in China. Notably, these are those that own high capacity facilities and are on the edge of Tier 1 markets. In the new project, GDS is developing two data centers that will occupy an aggregate IT area of approximately 11,400 m2. Interestingly, the firm revealed that all of the facilities have occupants just waiting to begin operations.
Notably, most of the customers for the facilities are in need of scalable data centers where they can expand their capacity as it becomes necessary. Interestingly, many businesses in the country are in dire need of such scalable facilities. As such, most of the customers pre-commit even before construction breaks ground. According to GDS, there is 100% pre-commitment for the current projects. The firm expects the facilities to be ready for operations by 2020.
Analysts strongly feel GDS stock is a sell
The firm reckons that there is robust demand for the data centers in the country. Notably, the addition of the Kunshan project pushes GDS’ backlog to a little over 70,000m2. This is a record backlog for the company which, as per the management, is a good sign for this year. Interestingly, the firm ended last year on a not so good note as investors dumped its shares.
Market analysts advised that investors should consider dropping off GDS as the falling earnings were indicative of much more problems ahead. Notably, the firm experienced a significant decline in the share price in the weeks leading to December 31, 2018. Further, GDS issued revised guidance on its earnings for Q4 2018. As such, analysts such as Zacks Investment Research strongly felt that the stock is a sell.