5 Data Center Stocks Down 30% from 52-week Highs

The data center industry has long been viewed as a cornerstone of the digital economy, supporting the infrastructure for cloud computing, big data, and the growing demand for connectivity.

However, recent market conditions have caused a significant pullback in the sector, with several prominent data center stocks dropping more than 30% from their 52-week highs.

Market volatility can cause even the most promising growth stocks to experience steep declines. This sharp decline has sparked concerns among investors and raised questions about the future performance of these companies.

In the ever-shifting landscape of stock markets, identifying growth stocks that have experienced a notable dip can be a savvy investment move.

In this pursuit, it's easy to overlook the market leaders that have recently corrected by as much as 30%, that may rebound once the trend reverses.

In this article, we will explore the reasons behind this downturn, the companies most affected, and what it means for both investors and the broader data center industry. These companies might be undervalued at the moment, making them worthy of a place on your watchlist.

By examining the factors contributing to these price declines, we can gain insights into whether this trend presents an opportunity for potential recovery or a signal for further challenges ahead.

Read on...

#1 Anant Raj

Anant Raj Ltd was incorporated in 1985 as Anant Raj Clay Products by Ashok Sarin.

It is primarily engaged in the development and construction of IT parks, hospitality projects, SEZs, office complexes, shopping malls and residential projects in the State of Delhi, Haryana, Andhra Pradesh, Rajasthan, and NCR.

The company successfully developed more than 20 m sq. ft. of real estate projects in the housing, commercial, IT parks, shopping malls, hospitality, residential and affordable housing sub-segments.

The company derives 96% of its sales from real estate sales and balance 4% from rentals and services. The company proposes to scale up its data center capacity to 307 MW within 5 to 6 years.

As of Q3 FY25, it is developing 15 MW in Manesar and 7 MW in Panchkula, bringing the total IT load capacity under development to 22 MW.

In July 2024, Anant Raj Cloud Pvt. Ltd, a wholly owned subsidiary of New Delhi-based realty developer Anant Raj has entered into an agreement with Google LLC, a global technology leader.

Under this collaboration, the company will be responsible for providing data center infrastructure, managed services, and cloud platform to various public and private enterprises.

Coming to the financials, Anant Raj Ltd reported a 45.9% growth in revenue in 9MFY25 and EBITDA growth came in at 52.2%. EBITDA margins also improved from 22.1% in 9MFY24 to 23 % in 9MFY25.

Going ahead, for FY26 the company has acknowledged the competition in the data center space but it has capabilities in its own infrastructure.

Anant Raj stock made a high of Rs 935 and is currently trading at Rs 513 a correction of 45%.

#2 Cummins India

Cummins India Ltd is a part of the Cummins Inc. Group USA.

It designs, manufactures, distributes and services diesel and alternative fuel engines from 2.8 to 100 litres, diesel and alternative-fuelled power generator sets of up to 3,000 kW (3,750 kVA), as well as related components and technology.

Cummins India has 2 major business divisions in India viz. engines business division (69% revenues) and lubes business division (31% revenues).

Geographically, the company derives 70% of its revenues from the domestic market and balance 30% from international markets. The company exports its products to the US, the UK, Mexico, Singapore, and China.

Cummins is a provider of backup power solutions for the data center industry, with the largest dedicated support network coverage in the world.

The company provides generation systems in various segments, such as infrastructure, IT/ITES, data Centers, reality, healthcare.

As data centers transition toward carbon-neutral technology, Cummins' sustainable power solutions align with our nation's goals, facilitating a cleaner and more sustainable future.

Coming to the financials, Cummins India reported a 18.2% growth in revenue in 9MFY25 on the back of strong growth across segments. EBITDA growth came in at 26.3% with margins improving to 19.6% from 18.4% in 9MFY24.

Going ahead, the management is optimistic about the growth trajectory, projecting a continued double digit growth in revenue for the next financial year.

Cummins India stock made a high of Rs 4,132 and is now trading at Rs 2,674, a correction of 30%.

#3 ABB India

ABB India Limited is an integrated power equipment manufacturer supplying the complete range of engineering, products, solutions and services in areas of automation and power technology.

ABB India is a subsidiary of ABB Ltd which is a leading electrification and automation company globally. The company derives significant benefits from its parent in the form of access to centralised R&D facilities of ABB for which it pays royalty to ABB.

ABB India stands out as a strong contender to benefit from the growing investments in the data center space due to its wide range of solutions tailored to the unique needs of data centers.

In the area of power distribution, ABB India offers an extensive portfolio that includes transformers, circuit breakers, switchgear, and remote power panels.

Its high-efficiency transformers are particularly noteworthy for their ability to minimise energy losses, making them ideal for modern data centers.

Coming to the financials, ABB India reported a growth of 14.7% in its revenues for 9MFY25, and profit after tax grew by 48.7% for the nine month period. EBITDA margins improved significantly coming in at 18.7% for 9MFY25 versus 13.9% in 9MFY24.

Looking ahead, ABB India is positioned well for future growth with a diverse portfolio, strong market demand, and a commitment to sustainability. The management is optimistic about continued growth driven by strong pipeline and market demand.

Stock price of the company made an all time high of Rs 9,020 and the share is currently trading at Rs 4,935, a correction of 43% from the top.

#4 Voltas

Voltas manufactures and sells a diverse range of products, including air coolers, air conditioners, washing machines, and dishwashers.

The company was created 6 decades ago when Tata Sons joined hands with a Swiss company Volkart Brothers. Voltas is also one of the most reputed engineering solution providers. The company has 5,000+ customer sites actively managed across India.

Voltas derives 77% of its revenues from room AC's, 9% from commercial refrigeration, 9% from CAC and balance 4% from air coolers.

As of Q1FY25, the company has 6 manufacturing facilities at Waghodia (Gujarat), Sanand (Gujarat) and 2 at Pantnagar (Uttarakhand), and 3 R&D Centers. The company has a manufacturing capacity (CAC) 5 lakh tons and (AC) 4.9 m units.

Its prominence in the commercial air conditioning segment is underscored by its specialised cooling solutions tailored for data centers.

It's strong presence in the data center space positions Voltas to benefit significantly as India's total investments are projected to surpass US$ 100 bn by 2027.

Coming to the financials, Voltas reported a growth of 28.9% in its revenues for 9MFY25, and profit after tax grew by 191.3% for 9MFY25. EBITDA margins also improved significantly from 3.4% in 9MFY24 to 7.4% in 9MFY25.

Going ahead, the management remains optimistic about robust performance across all business segments.

The share price of the company touched a high of Rs 1,929 and is currently trading at Rs 1,406, a correction of 27%.

#5 KEC International

KEC International is a global infrastructure EPC company. It has presence in the verticals of power transmission and distribution, railways, civil, urban infrastructure, solar, oil & gas pipelines, and cables.

It is the flagship company of the RPG Group. The company has a footprint in 110+ countries with 300+ ongoing projects.

It has a strong presence in India, the Middle East, Africa, South Asia, the Americas,and Central Asia.

The company has three tower manufacturing facilities in India (Nagpur, Jaipur and Jabalpur) and one tower manufacturing facility each in Mexico, Brazil, and Dubai, with a combined manufacturing capacity of 362,200 MTPA.

KEC also has cable manufacturing (power and telecom) facilities in Mysore and near Vadodara with a combined capacity of 48,000 MTPA in addition to 12,000 MTPA of solar manufacturing capacity.

In Q3FY25 earnings call, the management indicated that the business continues to demonstrate strong order booking momentum across driver segments, including T&D, railways, metro, solar, metals and data centers.

With a diversified portfolio across civil, renewables, and cables, KEC is well-positioned to capitalise on growth opportunities in various sectors.

The company's growth strategy includes expanding its presence in international markets, particularly in regions like the Middle East, Africa, and South Asia.

Coming to the financials, KEC International reported an 8.9% growth in revenue in 9MFY25. EBITDA growth came in at 16.7%. EBITDA margins also improved from 6% in 9MFY24 to 6.4% in 9MFY25.

Going ahead, its continued investment in new technologies and infrastructure will further strengthen its competitive position.

KEC International's stock price made a high of Rs 1,240 and is currently trading at Rs 677, a correction of 45%.

Conclusion

The recent downturn in data center stocks, presents a challenging yet potentially rewarding environment for investors.

While market volatility has contributed to these declines, the long-term growth potential of the data center industry remains intact, driven by the increasing demand for cloud computing, big data, and connectivity.

Companies like the ones mentioned above, despite facing short-term setbacks, still hold promising prospects within the rapidly evolving data center sector.

As always, conducting thorough research and maintaining a well-diversified portfolio are key to navigating the unpredictable nature of the stock market.

Investors should remain vigilant, conducting thorough research and keeping abreast of market trends to ensure they make informed decisions.

Remember the challenges before diving headfirst.

Happy Investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...