Why OVH is falling in the stock market
Compared to the American market, Europe has few key technology stocks, especially in the “Cloud” universe.
This scarcity should theoretically benefit such a society OVH CloudIt was sold at the price of 18.50 euros on the exchange in October 2021 and is currently sold at 14.74 euros.
The site hosting and public and private cloud solutions specialist, which has been fairly resilient despite a stock market correction that has hit the tech sector in particular around the world, fell after posting third-quarter sales on June 30.
The company announced turnover of 202 million euros (for the 3-month period ending at the end of May 2022), up 25.9% year-on-year.
For the nine months, OVH’s sales reached 584.5 million euros, compared to 495.1 million euros in the first nine months of fiscal 2021.
Above all, in this release, OVH raised its forecasts for the fiscal year, targeting sales growth of 16% to 18% and an adjusted EBITDA margin of “closer to 40%.”
However, after this publication, OVH’s stock price fell by 15% (it had even started falling sharply the day before the quarterly sales announcement).
In a note dated June 30, analysts at BNP Paribas Exane noted: “Cautious comments on customer demand, which accounts for more than half of OVH’s sales, have spooked the market over the outlook for fiscal 2023 of an uncertain macro-economic environment that will test the company’s business model.” »
A sentiment echoed by Societe Generale analysts: “We would like OVH to publish performance figures. [KPI] from the beginning of FY 2023 to demonstrate its success [dans le domaine des solutions PaaS] and allows to better estimate the potential income of this activity until 2025 [nous anticipons 100 millions d’euros de ventes] “, they write in a note dated July 1, 2022.
Investor caution is also fueled by increased competition in data protection.
Among the company’s main arguments during the IPO was its ability to defend data sovereignty in a market dominated by American “hyperscalers” in Europe.Amazon (“Wide Ditch”), Microsoft (“Wide Ditch”), google/Alphabet (“Wide Trench”)) or Asia (Ali Baba (“Wide Moat”)), as well as end-to-end control of its own infrastructure.
OVH owns almost all the data centers and builds the computer servers itself, which will give it a competitive advantage by offering low-cost services.
Despite the very rapid growth, the company is still far from the critical scale that can provide sufficient profitability to face the competition of the world leaders in the cloud.
In 2021, OVH recorded revenues of €663 million and an adjusted EBITDA margin of 39.5%.
At the time of the IPO, the company claimed the second position in Europe in private cloud (62% of sales) and the 5th position in public cloud (13% of sales).
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