GDS Holdings
It has been a while since I touched on $GDS Holdings Ltd(GDS)$ / $GDS-SW(09698)$ . As stated on 6 January 2023, sensing the strong resistance line at $28 and given the uncertain period then (has we stabilised?), I have decided to take profit.
Fast track to today (4 months later), why am I revisiting it? As stated in all my GDS update, I deem the company as a long term prospect, thus it is always a 'when', rather than a 'if' I will revisit it. However, in this 4-month period, I do have other alternatives in the sector to share.
As mentioned last time round, GDS Holdings runs data centre. So as long as there is a need for data storage, this business will be in demand. As many readers know, Artificial intelligence (AI) is one of the latest hot investment themes. However, no AI is possible without data storage. With more AI moving into cloud drive, even more data storage facilities will be required. Data storage facilities owners like GDS are bound to benefit from this AI trend.
Charts
Let's visit some charts to explain why I am back for sharing.
Before I explain that chart, I note that GDS Holdings will announce its latest financial result on 25 May 2023.
You will first noticed from the primary chart that GDS has been dropping lately. Sharp readers might also noticed my previous buy and sell markers. Given that the result announcement is around the corner, it might be apparently that the market participants are not expected great things from this company. One thing is certain, the company will still see losses in the near future. This might explain market pessimism for the company.
I have drew 2 blue vertical lines in the charts. These are the times when GDS previously announced its results. If you follow both the primary and secondary (RSI) charts, you might notice certain similarities in the charts pattern. The stock performance in all three timeframes prior to result announcements is equally bad (see downtrend in all). You will also notice prices corrected back up following the announcements (after the two vertical blue lines). It is timely to remind readers that price action might not follow history. So, do your own research.
In the primary chart, I have used Bollinger bands as the indicators for the primary chart, while RSI for the secondary chart. The candlesticks are currently near the lower band in the primary chart. RSI indicator also shows oversold position in both daily and weekly timeframes.
As mentioned in my earlier articles, oversold does not mean that we will see an immediate correction in prices. It just means a correction is imminent.
Trading strategy
Given that the correction of the share price of GDS since its last result, the market has taken its expected losses into consideration. In fact, from the oversold position indicated by both Bollinger bands and RSI, the market has probably overdone it.
I see this as an indicator for taking a position in the company. Even though the long term outlook for GDS Holdings is good, I will still follow the last trading strategy to take profit at a later stage to minimise the risk.
I mentioned earlier about alternative in the sector. Introducing $Chindata Group Holdings Ltd(CD)$ , a GDS peer / competitor in China. The standout point about the company is it is profitable! You read that right, while GDS and others in the data storage sector are losing money, Chinadata is making profit. It manages that with its targeted and niche approach of just going for a few, but very strong cilents. The disadvantage of this approach is obviously the concentration of customers, so risk is higher. On the flip side, it is focused and acquisition cost could be cut to minimum as compared to the industry peers.
Chinadata chart as above: neutral stance. From chart perspective, no motivation for entry. The shares price does not appeared overpriced or underpriced. From investment perspective, it might be alright to take a small bite at the cherry 🍒 and to slowly accumulate. After all, I expect data storage in general to do well. Given the growing wealth and usage demands of the nation, the sector would definitely perform!
P.S.: for transparency sake, my queue for GDS was done while I was writing this article [Cool]
Finally, do let me know if you like me to follow up on this article. Do also share this post if you think this sector will do well in the future.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
$万国数据(GDS)$ faces competition from a number of other data center operators, including China Unicom, China Telecom, and China Mobile.
I think $万国数据(GDS)$ is a well-positioned company with strong growth prospects.
I don’t think it’s a good one to buy now.
How is the overall SG stock market in going these days?