Morningstar vs. Wall Street: Analysts Advised Selling Nebius Ahead of Earnings Report

The American investment and rating agency Morningstar has recommended selling Nebius Group shares, calling them significantly overvalued. A Morningstar strategist warned of a large number of “red flags” and a high level of uncertainty. This runs counter to Wall Street’s consensus ahead of the company’s second-quarter 2026 earnings report, which it will release on August 12. Morningstar also issued recommendations on five other stocks.

The market price of Nebius shares is 57% above their fair value, making the company’s stock “significantly overvalued,” said Morningstar strategist Dave Sekera. At the same time, the agency’s model already anticipates rapid business expansion: revenue for Arkady Volozh’s neo-cloud company is expected to rise from $530 million in 2025 to $29 billion by 2030, representing an average annual growth rate of 122%. Even under this scenario, the agency considers the stock too expensive: Nebius’s current market capitalization is 36 times greater than the profit the agency expects the company to generate in 2030.

According to Morningstar’s estimates, Nebius will not turn a profit until at least 2028, and its free cash flow will remain negative through 2030 due to significant expenses related to business expansion. The company will have to continuously raise debt, and challenges in the debt market could prevent it from securing sufficient funds to build its infrastructure. Morningstar also considers the uncertainty surrounding Nebius’s stock performance to be very high and does not see the company as having any sustainable competitive advantages.

The market views Nebius differently. Of the 19 analysts whose estimates were compiled by FactSet, 12 rate the stock positively (Buy and Overweight), six recommend holding it (Hold), and only one recommends selling it (Underweight, “below market”). The consensus recommendation is “Overweight,” the same as it was three months ago. According to FactSet, analysts’ average price target is $263 per share—43% above the closing price on August 10.

— Ciena. Shares of the network optics manufacturer are trading at a premium of more than 50% above fair value, according to Morningstar. The company has benefited from the AI boom and has seen its stock price rise by more than 330% over the past year. Even assuming revenue growth of more than 18% per year—reaching $11 billion by 2030—its market capitalization is 64 times its expected earnings for 2026.

— Delta Air Lines. Airlines aren’t a good fit for a “buy-and-hold” strategy: it’s better to buy on dips and sell when prices have risen too high, according to Morningstar. Demand for flights is near its peak, high fuel prices could hurt ticket sales, and profitability could fall back to normal levels.

— ServiceNow. Shares of this enterprise software developer are trading at a 24% discount to Morningstar’s fair value estimate. Earnings beat expectations, sales of AI products are growing, and the shift away from overheated AI hardware should provide support for the stock.

— Mondelez. The food manufacturer’s shares are trading at a discount of nearly 20% to their fair value, with a dividend yield of 3.2%. The business’s main growth driver is emerging markets, which account for 40% of sales; revenue there grew by 7.4%. The European segment remains weak.

— Medtronic. The medical device manufacturer’s stock is undervalued by 22%, with a dividend yield of 3.3%. In the fourth fiscal quarter, revenue rose 7% and operating income increased 29%. Morningstar expects Medtronic’s earnings to grow by more than 8% per year on average over the next five years.

— Rheinmetall. Shares of the German arms manufacturer have fallen by roughly half from their highs. Morningstar sees nearly double the upside potential: Germany will need at least ten years to replenish its stockpiles following deliveries to Ukraine, and current share prices do not fully reflect a potential increase in defense spending.

— RELX. The Anglo-Dutch owner of LexisNexis saw its stock price fall along with the software sector during the “software apocalypse,” but AI does not pose a threat to its business: the company has extensive databases of legal, business, and scientific information, which gives it an advantage over its competitors, according to Morningstar.

— National Grid. Morningstar expects the British power grid operator to grow thanks to its modernization efforts for renewable energy. The investments provide a guaranteed return, and revenue is stable. The dividend yield is above 4%, and cash flow covers dividend payments.

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