21Vianet (VNET) Defended at Canaccord Genuity; Analyst Says Report is Extremely Poor Quality

Canaccord Genuity maintained a Buy rating on 21Vianet (NASDAQ: VNET) with a price target of $35. Analyst Greg Miller defended the stock after the company was accused of fraud recently. He went on to say financial analysis in the fraud report is of extremely poor quality.

"With the call, the company strongly refuted the basis of the claims that the company has misrepresented financial results and overstated utilization or that it was operating its MNS business (about 30% of revenues) illegally. Management also attempted to provide greater details on its two most recent acquisitions, which made it clear the analysis of the research entity’s report was fundamentally flawed. We will have to await the more detailed refutation of the report before we believe the stock will again trade on the fundamentals that our $35 price target is based upon," said Miller.

"Although the report highlights in detail the cash burn that results from aggressive data center expansion, it fails to recognize this as an industry trend that even the most successful data center companies experienced in their own extreme growth phase. This is far from unusual or suspicious, in our view," continued Miller.

"Although we are not in the position to refute all of the claims of fraud ourselves, we are reasonably confident that the financial analysis in the report is of extremely poor quality and should cause serious questions about the credibility of the claims. To suggest the MSN business is a 100% margin business strains credulity," he added.

For an analyst ratings summary and ratings history on 21Vianet click here. For more ratings news on 21Vianet click here.

Shares of 21Vianet closed at $20.12 yesterday.

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