Nebius stock is up 160% for the year. Why do Freedom analysts recommend buying them?

Freedom analysts have begun covering shares of AI company Nebius Group, headed by Yandex co-founder Arkady Volozh, and are recommending investors buy them, according to a research note seen by Oninvest.com. It came out a few days before Nebius reports - on February 12, before the market opens in the U.S., the company will release results for the fourth quarter and all of last year and may give a forecast for 2026.

Ahead of this, Freedom analysts have set an initial target price on Nebius over a 12-month horizon of $108 per share. This is about 25% above the current stock price on the stock exchange.

"We intentionally use the word 'initial' [target price]. This is fundamentally important," the analysts wrote. - <...> We prefer to wait for the company and other sources to build our confidence in the year's projected performance before valuing the company primarily based on next year's expected revenue."

Freedom predicts that AI company revenue will more than triple between 2026 and 2027, to $10.6 billion. The market consensus forecast is more modest: it expects revenue to grow 2.4 times to $8.2 billion, according to Market Screener data.

Among the key drivers of Nebius' revenue growth, analysts cite its partnership with advanced graphics processor vendor Nvidia and contracts with tech giants Microsoft and Meta. Most recently, these companies said they will spend $271 billion combined on AI hardware over the next year, increasing their spending by more than 40 percent over fiscal 2025. "The significance of these customers is that they have investment grade credit ratings, which reduces Nebius' cost of debt and weighted average cost of capital for Nebius," the note said.

Freedom expects that Nebius customers will include other hyperscalers.

In addition, analysts note mature management and a strong team in the field of artificial intelligence. Nebius emerged as a result of the division of the business of Yandex, the market leader in Internet search in Russia, into a Russian and a foreign part. Company founder Arkady Volozh played a key role in Yandex's success and brought about a thousand experienced engineers to Nebius, they note.

One of the key risks to the company is its reliance on a limited number of customers, Freedom said in a note. Any reduction in cooperation could significantly impact the company's financial performance, the analysts said. Another risk is increased competition, including from hyperscalers that may launch specialized cloud offerings for artificial intelligence. In addition, building and scaling data centers requires significant upfront investment. "Implementation errors or delays can limit business expansion and put pressure on margins in the short term. Unfortunately, some of the delays may be beyond Nebius' control," the analysts wrote.

Quotes of the AI company on Nasdaq have grown by more than 160% over the past year. At the same time, from the peak reached in October, the stock has lost 30% of its value. According to MarketWatch, no analysts on Wall Street are now advising investors to sell Nebius. Nearly 80% of experts tracking the company have given it a Buy recommendation.

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