- Nebius stock price has formed a double-top pattern on the daily chart.
- There are concerns about its soaring debtload and future dilution.
- The company has continued to experience substantial depreciation.
Nebius stock price pulled back for the third consecutive day as the company faces elevated short selling despite its strong revenue growth. NBIS dropped to $202, down from the year-to-date high of $233.80. It has formed a major bearish chart pattern, pointing to more downside in the near term.
Nebius Stock Price Technical Analysis Points to More Downside
The daily timeframe chart shows that the NBIS stock price has pulled back in the past few days. This retreat happened after the stock formed the risky double-top pattern at $226 and a neckline at $200. A double-top is one of the most common bearish sign in technical analysis
Notably, the Percentage Price Oscillator (PPO), a unique version of the MACD indicator, has also formed a double-top pattern at 11.67% and a neckline at 4.98%. The two lines of this pattern have formed a bearish crossover and are pointing downwards, a sign of exhaustion.
Nebius stock price remains much higher than the 50-day Exponential Moving Average (EMA). Also, the Relative Strength Index (RSI) has also pointed downwards.
Therefore, the stock will likely continue falling in the near term, potentially to the psychological level of $140, its highest point in October last year. However, a move above the double-top point at $227 will invalidate the bearish outlook.
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Nebius Group Faces Some Major Risks
Nebius Group, a top player in the data center industry, is doing well in many metrics. Its revenue has surged, with analysts expecting that its annual figure will jump by 550% this year to $3.4 billion. It will then soar by 220% next year to $10.9 billion. As such, if this trend continues, chances are that its revenue will hit $50 billion in the coming years.
Nebius has benefited from the ongoing demand for data center solutions amid the artificial intelligence (AI) boom. It has received major orders, including a $27 billion from Meta Platforms. This growth will accelerate in the coming years as companies like Meta, Microsoft, and Amazon continue to boost their data center spending.
Still, the company faces some major challenges, which explains why investors have shorted the company. It has a short interest of 20%, higher than other companies in the industry.
One of the challenges is the rising debtload as it boosts its data center spending. For example, its total debt has jumped from $288 million in 2022 to over $9.4 billion. This debtload will likely continue rising as the company boosts its data center spending.
The other main challenge is that the company may decide to use its $53 billion equity to raise capital through the at-the-market (ATM) offerings. In its last earnings report, the management left the door open that it may start raising cash using its equity.
Nebius Group also faces the challenge of its valuation. Its current market capitalization of $53 billion is much higher than the revenue backlog of nearly $49 billion.
Most notably, the neocloud industry has become highly competitive, with top companies like IREN, CoreWeave, RIOT Platforms, Hive Digital, Core Scientific, Hut 8, TeraWulf, and Cipher Mining entering the space. This means that the future contracts will be highly competitive, which may hit its margins.
Additionally, depreciation is a major risk for the company. Its depreciation in the trailing twelve months (TTM) was $580 million, equivalent to to 66% of its revenue.
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