Nebius stock has experienced a notable surge, rising 15% following the announcement of an expanded cloud computing infrastructure deal with Meta Platforms. This agreement will see Nebius provide Meta with at least $12 billion of AI data center capacity by 2027, with the potential deal value reaching up to $27 billion over the next five years.
As a result of this announcement, Nebius shares have rallied significantly, now trading up 80% from their year-to-date low. However, a discounted cash flow (DCF) model suggests that Nebius stock may be overvalued at current levels, with an estimated intrinsic value of nearly $94. Currently, Nebius Group is trading at about $130, indicating a 38% premium to its fundamental value.
The consensus rating on NBIS is a ‘moderate buy’, with a mean target of approximately $154. This optimism is reflected in the stock’s price-to-sales (P/S) multiple, which stands at about 54x. The market is currently in a ‘buy-at-any-price’ frenzy for AI compute providers, raising questions about the sustainability of such valuations.
Nebius has been operating at full capacity for years, primarily due to agreements with Meta and Microsoft. Additionally, Nvidia’s recent $2 billion investment in Nebius is viewed as a significant de-risking event, further bolstering investor confidence.
Despite the positive momentum, analysts are cautious. Questions remain about whether investors should sell NBIS shares at this juncture, especially given the high trading price. For growth investors, the belief that the $27 billion agreement with Meta Platforms could be just the first of many deals justifies the current price tag of $129.
As Nebius continues to navigate its massive backlog and execution risks, further developments are expected in the coming months. Details remain unconfirmed regarding how the company will manage its growth and capacity in light of these new agreements.
