Diversification Strategy Sparks Bullish Impetus in Nebius Group Stock (NBIS)
When I first invested in Nebius Group (NBIS) earlier this year, I approached it with cautious optimism—hyper- growth stocks carry inherent risk. Today, with the stock up over 50%, I remain confident and recently raised my 12-month price target to $60, implying further upside of over 50%.
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While its EV/Sales multiple above 50x may appear steep, it's less relevant for a vertically integrated AI infrastructure leader positioned to capitalize on current momentum. In my view, Nebius remains one of the most compelling growth stories in tech today.
Nebius's Unstoppable Growth Drives Investor Frenzy
Nebius's recent growth is off the charts. Nebius posted exceptional growth in Q1 FY2025, reporting $55.3 million in revenue —a 385% year-over-year increase—driven by surging global demand for AI and generative computing solutions. Management projects annual recurring revenue (ARR) between $750 million and $1 billion by year-end, underscoring the company's ambitious trajectory.
What sets Nebius apart is its diversified, vertically integrated approach. Beyond its core AI cloud services, the company operates in several high-growth areas: Avride, an autonomous mobility venture; Toloka, a data-labeling and AI development platform backed by Jeff Bezos's venture arm; and TripleTen, an edtech startup focused on tech career reskilling. This strategic breadth positions Nebius to tap into multiple revenue streams within the expanding AI ecosystem.
While some still associate the company with its Yandex origins, Nebius has taken definitive steps to establish its independence, restructuring in 2022, relocating its headquarters to Amsterdam, and relisting on Nasdaq. Its $700 million funding round in December, led by investors including NVIDIA and Accel, affirms growing confidence in Nebius as a credible and emerging leader in global AI infrastructure.
Investors Await Rewards as Profitability Approaches
While Nebius continues to invest aggressively, it is beginning to demonstrate operating leverage. In the same quarter that delivered standout revenue growth, the company reduced its adjusted EBITDA loss from $70.9 million a year ago to $62.6 million—an encouraging sign of improving cost efficiency.
A year ago, operating expenses stood at an unsustainable 827% of revenue; that figure has since declined to 334%. Though still high, the downward trend points toward greater operational discipline. Nebius's cloud-based model is inherently scalable, allowing margins to expand as revenue grows and fixed costs are spread across a larger customer base.
Management is targeting adjusted EBITDA profitability in the second half of FY2025—a goal that appears increasingly attainable given the company's accelerating top-line growth and improving cost structure
Valuation Is Always Relative
Let's tackle the elephant in the room—valuation. Based on an EV/Sales multiple of approximately 50x, Nebius appears expensive. For reference, Snowflake (SNOW) had a near-peak multiple of around 150x EV/Sales in early 2021 and fell rapidly to around 20x as revenues scaled. It's reasonable to expect Nebius's valuation will experience a similar development.
Currently, Nebius stock exhibits extreme bullishness, as indicated by technical indicators, including the 14-day RSI, which stands at around 70. High volatility and irrational exuberance are typical among rapidly growing stocks, so investors should prepare for volatility, even when it's unlikely or difficult to ascertain, by examining the stock's price performance relative to its peers. Sentiment is always a risk with highly valued hyper-growth plays.
However, when I consider the company's peers, Databricks or CoreWeave, Nebius's valuation is not entirely out of sync with the valuation models I commonly see across the AI infrastructure space. High multiples today can come back to earth in the near future as revenues move on up, making the current premium worthwhile.
Is Nebius a Good Stock to Buy?
On Wall Street, Nebius has a consensus Strong Buy rating based on three Buys, zero Holds, and zero Sells. The average NBIS stock price target of $52.33 indicates a 37% upside potential over the next 12 months. However, if it reaches $60, we're looking at a return of over 50% within 12 months.
I'm Sticking to My Guns on Nebius
I continue to view Nebius stock as one of the more compelling high-growth opportunities in today's market. While the stock may appear volatile and expensive by traditional metrics, its strong revenue growth, improving margins, strategic geopolitical positioning, and diversified revenue streams justify the current valuation.
I maintain a bullish price target of $60, reflecting my confidence in management's execution capabilities and the potential for a favorable macro environment next year. For investors seeking high-risk, high-reward opportunities, Nebius stands out as a resilient and promising player in the AI space.
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