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

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21Vianet Group Inc – ADR (NASDAQ: VNET) stock fell over 8.7% on November 20th, 2019 (Source: Google finance) after the company in the third quarter of FY 19 has reported the  net loss attributable to ordinary shareholders of RMB69.5 million (US$9.7 million) as compared to RMB29.6 million in the same period of 2018 and RMB102.1 million in the second quarter of 2019.

The company has delivered 12.7% rise in the  net revenues to RMB981.0 million (US$137.2 million) in the third quarter of 2019 from RMB870.1 million in the same period of 2018 driven by the growing domestic demand for data centers, due to the expanding scope of corporate digitalization across China. The company’s adjusted cash gross profit grew  by 1.2% to RMB396.7 million (US$55.5 million) in the third quarter of 2019. The company has posted the adjusted cash gross margin of 40.4% in the third quarter of 2019, compared to 45.0% in the same period of 2018.

VNET has generated cash and cash equivalents, restricted cash, and short-term investments of RMB2.94 billion (US$411.9 million). The company posted the net cash generated from operating activities of RMB103.0 million (US$14.4 million) in the third quarter of 2019 compared to RMB260.7 million in the same period of 2018 and RMB127.1 million in the second quarter of 2019.

For the fourth quarter of 2019, the Company expects net revenues to be in the range of RMB1,030 million to RMB1,050 million. Q4 2019 Adjusted EBITDA is expected to be in the range of RMB245 million to RMB265 million.

For the full year of 2019, the Company expects net revenues to be in the range of RMB3,771 million to RMB3,791 million. 2019 Adjusted EBITDA is expected to be in the range of RMB1,033 million to RMB1,053 million. The midpoints of the Company’s updated estimates reflects an increase of 11.2% year over year in total revenues and an increase of 13.6% year over year in adjusted EBITDA.

Meanwhile, the Company has recently signed a memorandum of understanding (the MoU) with Alibaba Group, according to which the Company will deploy IDC services to support Alibaba in its expansion throughout Eastern China. The company plans the project to be deployed in two phases. In the first phase the company plans to complete construction and cabinet deliveries by the first half of 2020. During the term of the project contract, the first phase is projected to generate revenue of RMB1.6 billion.

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