Citi predicted Nebius shares growth by 45%. Why is the bank not afraid of the securities falling?

Citi analysts for the first time started covering shares of the cloud company of Kazakhstan native Arkady Volozh and immediately advised to buy the securities. They expect their price to grow by 45%, despite their volatility: fluctuations are typical for the company and should not scare off investors, Citi believes.

Citi analyst Tyler Radke initiated coverage on shares of cloud company Nebius Group with a Buy rating, Barron's reports. Radke set a $169 target price on the securities, which implies a 45% increase in their price compared to their closing levels on March 17.

Nebius shares fell 10.4% to $116.3 on Tuesday. Investors negatively assessed the company's plans to issue bonds. At the same time, a day earlier, the securities, on the contrary, jumped by 15% during the day - after the company announced a major deal with Meta Platforms.

Nebius has over the past year become one of the leaders among the so-called neoblacks - new players providing computing power for AI, Radke said. Rapid infrastructure expansion and a wide range of services make the company one of the key beneficiaries of market growth.

Nebius combines data centers with proprietary hardware development and cloud software. The software division is still in its early stages, but could grow quickly as demand for inferencing - using trained models to make decisions and accomplish tasks - increases, Barron's writes.

Unlike competitor CoreWeave, which relies on long-term, unchangeable contracts, Nebius uses a hybrid model - a mix of short, long and usage-based agreements (pay-as-you-use), which gives more flexibility as the market grows.

Demand for capacity remains strong. Citi expects AI data center load to grow to 110 GW by 2030, up from 18 GW in 2025. Nebius itself had 170 MW of active capacity at the end of last year, but the company plans to increase that to 5 GW, which equates to about 5% of the market.

"Nebius is well positioned to build share in the AI computing market, which itself is more than doubling every two years," Radke noted.

The company is funding the expansion with a $2 billion investment from Nvidia and a bond offering. An additional source is advance payments from customers, Barron's writes. That said, the securities still have risks. Nebius started trading as an independent company only in 2024, after it got rid of its Russian assets. In 2025, its shares rose more than 350%. In addition, about 40% of expected recurring revenue in 2026 is accounted for by only two clients - Meta and Microsoft.

"We rate the company as high risk due to its limited trading history, capital-intensive data center expansion and dependence on a small number of large customers," Citi said in a note. At the same time, Radke is not embarrassed by the volatility of Nebius shares: it is typical for the company and should not scare off investors, he believes.

Nebius on March 17 announced plans to raise $3.75 billion through a convertible bond offering to finance the construction of data centers. This raised concerns among investors about dilution of stakes if the bonds are converted into equity, Barron's explains. Nebius will offer two bond issues with maturities in 2031 and 2033 in a private placement. The parameters - including the interest rate and conversion ratio - will be determined in the final pricing, the company said.

Morgan Stanley notes that shorter contracts can provide higher profitability than large "mega-deals", Barron's writes. At the same time, deals such as the contract with Meta improve the company's credit quality and its ability to raise debt financing. The bank maintains a neutral stance on Nebius shares and expects the securities to rise to $126, up 8% from the closing price on March 17.

Most analysts advise buying Arkady Volozh's stock: they have 12 Buy and Overweight ratings out of 15 total, MarketWatch shows. Two more recommend Hold, one recommends Sell. The Wall Street consensus target price is $174.6, which is 50% above the securities' current value.

This article was AI-translated and verified by a human editor