Target Hospitality Corp (NASDAQ: TH) saw its shares climb 10% on Tuesday after Stifel upgraded the stock from Hold to Buy and raised its price target from $7.50 to $11.00.
The investment firm cited the company’s entry into the data center market as a key driver of future growth.
Data center contract boosts growth prospects
The upgrade follows Target Hospitality’s announcement of its first data center contract, a two-year agreement with minimum commitments of $43 million.
The company, traditionally focused on lodging and hospitality, is extending its services to include accommodations and support for data center operators.
Analyst Stephen Gengaro of Stifel described Target Hospitality as a “back door data center play”, highlighting its ability to provide turnkey accommodations, logistical support, and culinary offerings for clients.
Under Stifel’s growth scenario, the company could operate 5,000 rooms for data center customers and 3,400 rooms for Government Services in the coming years.
Stifel believes additional similar contracts are in the pipeline, pointing to further upside.
The new price target represents an over 36% gain from Monday’s closing price.
After the initial jump, the company’s shares were trading at 5.34% up at $8.48.
Multi-year data center community contract
On Monday, Target Hospitality announced a multi-year lease and services agreement to support the development of a regional data center campus in the Southwestern United States.
The company will construct and provide turnkey support for the project, which includes premium culinary services, facilities management, and broader hospitality solutions.
The community will initially support 250 individuals, with capacity to expand to about 1,500 people as demand grows.
Target expects first occupancy in late 2025.
The contract runs through September 2027 and is expected to generate approximately $43 million in committed minimum revenue over its term, including about $5 million in 2025.
To fund the project, Target will leverage its existing asset portfolio, resulting in a relatively small capital investment of $6 to $9 million this year.
Management emphasized that this approach preserves financial flexibility while enhancing returns.
Brad Archer, Target’s President and CEO, said the agreement broadens the company’s customer reach and demonstrates its ability to provide “comprehensive hospitality solutions across diverse commercial end-markets.”
He added that with more than $1 trillion in technology infrastructure commitments announced in 2025, Target sees meaningful opportunities to expand alongside the digital infrastructure buildout.
Financial performance and strategic outlook
Target Hospitality reported second-quarter 2025 revenue of $62 million, surpassing the analyst consensus of $59.43 million.
However, earnings per share came in at – $0.1223, slightly below expectations of -$0.11.
The company maintains a current ratio of 1.47 and a market capitalization of $801 million, with shares trading at a P/E multiple of 72x.
The data center initiative marks a strategic shift for Target, which is best known for providing modular lodging and hospitality services to energy and government clients.
The company believes its operational model—combining accommodations, facilities management, and catering—can serve as an essential component of large-scale technology infrastructure projects.
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