Vertiv Holdings is an American company that manufactures critical infrastructure for servers, data centers, and communication networks. The company offers solutions in temperature management, power management, and provides service maintenance. In the context of the rapid development of artificial intelligence (AI) technologies, Vertiv appears to be a clear beneficiary of this trend. The fair value of the company's shares is $102.8, implying an upside of 27.7%.
Investment thesis
🔼 Strong Financial Performance. The company reported strong financial results for Q2 2024. Revenue increased by 13% y/y, reaching $1.95 bln. Adjusted earnings per share (EPS) jumped by 45.7% y/y to $0.67. Both figures exceeded market expectations. Revenue from the product segment, which accounts for nearly 80% of the business, grew by 14.3% y/y, while revenue from the service segment increased by 6.4% y/y. It is worth noting that service revenues usually lag behind product revenues, so growth in this area can be expected in the future. Vertiv also improved its full-year 2024 revenue and free cash flow forecasts to $7.665 bln and $875 mln, respectively.
🔼 AI Trend. Strong earnings from Nvidia, one of the main beneficiaries of the AI boom, show that this trend continues to gain momentum. This will drive high demand for server equipment, including Vertiv's products.
🔽 Risks. The company is relatively highly valued by the market—at nearly 25 times expected annual earnings, which is above the sector average. However, given the anticipated double-digit business growth in the coming years, this valuation may be justified. Additionally, the company's shares have undergone a significant correction from their 2024 peaks, making them more attractive for purchase.
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Disclaimer
The information provided above is not an investment recommendation and does not guarantee or promise profitability. Before investing, you should assess the potential risks and rewards and determine your willingness and ability to accept such risks.
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