Key Points
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Despite the deep cut, he didn’t downgrade his recommendation.
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He expressed concerns about the financing of upcoming projects.
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A rather deep price target cut from an analyst was the negative catalyst that drove down Keel Infrastructure‘s (NASDAQ:KEEL) equity on Monday. With that stiff headwind, investors traded out of the onetime cryptocurrency miner and data center developer’s stock to leave it with a more than 8% loss that trading session.
Uneven Keel?
Before market open, Keefe, Bruyette & Woods’ Stephen Glagola made the change, lowering his Keel price target to $3 per share. His previous fair value assessment was $4.50. However, he left his market perform (hold, in other words) recommendation intact.
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According to reports, Glagola wrote that while the company’s colocation fundamentals remain solid, the market needs more clarity on the construction costs and financing details of its projects.
He also expressed concern that client leases might decline across the industry, while regulatory uncertainty could grow in the otherwise promising Texas market.
From miner to landlord
While Keel is in a more advanced stage than some rivals in data center development, its three priority sites haven’t yet reached the full permitting stage.
The questions Glagola raised are concerning, and the company still needs to prove it can succeed and profit in the long term from data centers, especially given how capital-intensive the shift from crypto miner to data center operator can be. I’d hold off on the shares until we get a better sense of how effectively it’s managing the process.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
