Nebius stock price jumped by close to 5% on Friday, helped by a crucial announcement by Nasdaq. NBIS jumped to a high of $240, up modestly from the June low of $200. It has soared by over 220% from its lowest point this year, but it faces major risks that could hurt its near-term performance.
Nebius Group is Facing Some Major Tailwinds
NBIS stock jumped on Friday after Nasdaq announced it would be added to the index. This is an important move as all the exchange-traded funds (ETFs) that track the index will be required to buy it.
In most cases, stocks normally jump sharply after being added to major indices. However, these gains tend to be short-lived. A good example of this is Coinbase and The Trade Desk, which surged last year after being added to the S&P 500 Index. Today, they have all plunged into a bear market.
Nebius Group has other major tailwinds. For one, together with CoreWeave, it has become one of the top players in the data center industry, offering services such as computing. Nebius has received several major orders, including a $27 billion deal with Meta Platforms. It also received a $2 billion investment from Nvidia.
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The most recent financial results showed that its business is booming, with the quarterly revenue soaring by 684% to $400 million. The management believes that the annual revenue will jump to between $3 billion and $3.4 billion this year, a significant increase from the $529 million it made last year. Its revenue will then likely jump to $11.2 billion next year.
NBIS Faces Major Headwinds
Despite these tailwinds, the company faces major challenges. A key one is that competition in the industry is soaring. Recently, Google entered into a data center deal with SpaceX. It will lease thousands of NVIDIA GPUs and pay SpaceX over $900 million a month. More competition is coming from companies like CoreWeave, IREN, and Mara Holdings.
The company is also suffering substantially from depreciation. Its last financial results showed that depreciation jumped by 332% to $212 million, with management citing continued investments in data center hardware. The management revised the useful life of its server and network equipment from 4 to 5 years.
There are also concerns that the company is highly overvalued, as its market capitalization of $60 billion exceeds its revenue backlog of less than $50 billion. Indeed, the average target for the stock among analysts is $203, down from the current $213 level. Also, it likely explains why it has an elevated short interest.
Nebius Stock Price Technical Analysis
The daily chart shows that the NBIS stock price peaked at $279 in May and then pulled back to a low of $200 this month. This lower level coincided with the lower section of the ascending channel.
The stock has remained above the 50-day and 100-day Exponential Moving Averages (EMA). Remaining above that level is a sign that bulls are in control for now.
Still, the stock has formed a doji candlestick pattern, pointing to an eventual retreat, potentially to this month’s low of $200. A move below that level will signal more downside towards $180.
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