Media stock under pressure: 21Vianet Group Inc – ADR (NASDAQ: VNET)

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21Vianet Group Inc – ADR (NASDAQ: VNET) stock lost over 2.2% on 15th May, 2020 (as of 12:20 pm GMT-4; Source: Google finance) after the company’s first quarter of FY 20 update. The company has reported net loss attributable to ordinary shareholders in the first quarter of 2020 of RMB138.8 million (US$19.6 million), compared to a net profit of RMB5.6 million in the first quarter of 2019 and a net loss of RMB16.4 million in the fourth quarter of 2019.

The firm has reported 25.1% rise in the net revenues to RMB1.09 billion (US$154.1 million) from RMB871.9 million in the first quarter of 2019, which represents an increase of 4.1% from RMB1.05 billion in the fourth quarter of 2019. The year-over-year increase was mainly on the back of the growing demand for data centers in the domestic market, due to the ongoing expansion of corporate digitization across China, and an uptick in cabinet demand from the Company’s retail clients as a result of the pandemic. The company has generated net cash generated from operating activities in the first quarter of 2020 of RMB58.7 million (US$8.3 million), compared to RMB32.4 million in the same period of 2019 and RMB444.8 million in the fourth quarter of 2019. At the end of March, 2020, the Company’s cash and cash equivalents, restricted cash, and short-term investments were RMB3.49 billion (US$492.5 million). The company posted the Adjusted EBITDA in the first quarter of 2020 was RMB259.4 million (US$36.6 million), compared to RMB253.5 million in the same period of 2019.

For the second quarter of 2020, the Company projects net revenues to be in the range of RMB1,140 million to RMB1,160 million. 2Q 2020 Adjusted EBITDA is projected to be in the range of RMB290 million to RMB310 million.

For the full year of 2020, the Company projects net revenues to be in the range of RMB4,600 million to RMB4,800 million. Adjusted EBITDA is projected to be in the range of RMB1,250 million to RMB1,350 million. The midpoints of the Company’s updated estimates imply an increase of 24% year over year both in net revenues and adjusted EBITDA.

Meanwhile, in May 2020, the company had signed two memorandums of understanding with a leading internet company in China to provide colocation services in North China and East China using the Company’s existing resources. The construction is planned to get completed in different stages throughout 2020 and 2021. The two sites have a combined total IT power in excess of 50 megawatts.

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