Is Northern Data AG (FRA:NB2) Poised for a Contrarian Rebound?

The stock of Northern Data AG (FRA:NB2) has been a rollercoaster ride in recent weeks, marked by sharp declines and technical sell signals. Yet, beneath the noise of near-term volatility lies a compelling case for contrarian investors to consider an opportunistic entry ahead of its upcoming earnings report on July 17, 2025. With the stock trading at €22.14 as of July 14—down nearly 5% from its June highs—this article explores whether now is the time to buy, despite the risks, and why the fundamentals may support a rebound.

Technical Sell Signals and Near-Term Risks

The technical picture for Northern Data is bleak at present. Over the past month, the stock has trended lower, with a -4.64% drop on July 11 (from €23.26 to €22.18) and a daily volatility spike of 7.06%. Key bearish indicators include:
- Bearish Moving Averages: The 50-day MA (€25.73) is below the 200-day MA (€32.56), signaling a weakening trend.
- No Support at Lower Levels: The absence of significant support below €22.18 has left the stock vulnerable to further declines.
- Volume Increase on Drops: Rising volume on falling prices (e.g., 80,246 shares traded on July 11) suggests institutional selling pressure.

Adding to the near-term risks, the earnings report on July 17 could amplify volatility. Analysts project a swing of ±9.69% post-earnings, with low expectations given the company's €127.44 million net loss over the last 12 months. A beat on weak forecasts might catalyze a short-covering rally, but a miss could extend the downward trend.

The Contrarian Case: DCF Undervaluation and Earnings Catalyst

Despite the gloomy technicals, there's a contrarian angle to consider: the stock is trading above its discounted cash flow (DCF) fair value, but this may be temporary.

• DCF Fair Value at €19.16: A two-stage DCF model estimates the intrinsic value per share at €19.16, based on projected cash flows and a 7.2% cost of equity. This suggests the current price of €22.14 is overvalued by 15%, but this gap could narrow if the stock dips further amid earnings uncertainty.
• Earnings-Driven Reversal Potential: With losses mounting and debt at €713.66 million, Northern Data needs a strong earnings surprise to shift sentiment. A positive catalyst could include:
• Improved margins in its Taiga Cloud segment, which targets a €150–210 million revenue contribution in 2025.
• Progress on its 120MW Maysville data center (set to open in 2026), which could bolster long-term growth.

High Volatility as an Opportunity

The stock's beta of 1.45 underscores its sensitivity to market swings, but this volatility could be a contrarian's friend. The 90-day forecast range (€21.90–€28.45) offers a wide trading band, with the lower end of this range representing a 25% discount to the DCF fair value. Investors could use this volatility to:
- Dollar-cost average into dips: Enter positions on sharp declines below €22.00, with stop-losses below €20.00.
- Target a post-earnings rebound: If results beat expectations, the stock could rally toward resistance at €25.82, the upper end of the forecast range.

Investment Recommendation

Northern Data AG presents a high-risk, high-reward contrarian opportunity for investors willing to look past near-term headwinds.

• Buy Signal: Consider a gradual entry at €21.90–€22.50, with earnings as the catalyst. A post-earnings rebound could push the stock toward €25.00–€28.00 by October.
• Avoid: Stay sidelined if the stock breaches support at €20.00, signaling deeper structural issues.

Conclusion

Northern Data AG's downward trajectory has priced in its financial struggles, but the DCF undervaluation, upcoming earnings, and high volatility create a unique contrarian setup. Investors who bet on a positive earnings surprise and a subsequent shift in sentiment could profit from the stock's potential rebound. However, caution is warranted: the path to recovery hinges on execution, and the balance sheet remains fragile. For those with a high risk tolerance and a long-term horizon, now is the time to monitor Northern Data closely—and be ready to act if the earnings report delivers a spark.