On Wednesday, UBS began coverage of Vertiv Holdings Co. (NYSE:VRT) stock, a company specializing in data center solutions, with a Buy rating and a price target of $155.00.
The firm forecasts a 20% compounded annual growth in earnings per share (EPS) from 2024 to 2028 for Vertiv, a rate approximately twice the average of its coverage in the Electrical Equipment/Industrial Machinery (EE/MI) sector.
The company's strong focus on data centers, which account for 75% of its revenues, positions Vertiv as a primary beneficiary of ongoing secular trends in the industry. According to UBS, this specialization is expected to contribute to sustained double-digit market growth each year and the continuation of solid earnings conversion.
UBS also anticipates that Vertiv's long-term financial targets might be revised upward during the upcoming Investor Event scheduled for November 18 in Atlanta. Such a revision is expected to provide further momentum for the company's shares to rise.
The analyst's optimistic outlook reflects Vertiv's potential to capitalize on the increasing demands of the data center market and its ability to translate market growth into robust financial performance. The Investor Event later this month could serve as a catalyst for the company's stock, as new financial targets are likely to be set.
In other recent news, Vertiv Holdings Co. has reported strong third-quarter earnings, displaying a 19% increase in organic sales and a 37% growth in orders. The company has also raised its full-year guidance, now expecting a 14% organic growth and $1 billion in adjusted free cash flow.
The impressive results have led TD Cowen, Mizuho (NYSE:MFG) Securities, and Oppenheimer to maintain positive ratings and raise price targets for Vertiv.
In addition to financial results, Vertiv has announced the promotion of Scott Armul to executive vice president, global portfolio and business units. Armul's role will be pivotal in guiding Vertiv's portfolio strategy to meet evolving industry needs and customer demands.
The company also revealed plans to expand its liquid cooling capacity by 45 times by the end of 2023 and a strategic partnership with NVIDIA (NASDAQ:NVDA) to co-develop power and cooling solutions.
These developments are part of Vertiv's growth-oriented strategy, aiming to consolidate its market position. It's worth noting that these are recent developments, and the company's future performance will be influenced by these strategic decisions. However, the company's strong Q3 performance and the positive outlook from analysts indicate a promising trajectory for Vertiv.
InvestingPro Insights
Vertiv Holdings Co.'s (NYSE:VRT) strong market position and growth potential, as highlighted by UBS, are further supported by recent financial data and insights from InvestingPro. The company's revenue growth of 13.2% over the last twelve months, with an even stronger quarterly growth of 18.99% in Q3 2024, aligns with UBS's projection of sustained double-digit market growth.
InvestingPro Tips indicate that Vertiv's net income is expected to grow this year, and 12 analysts have revised their earnings upwards for the upcoming period. This corroborates UBS's forecast of a 20% compound annual growth in EPS from 2024 to 2028. Additionally, Vertiv's profitability over the last twelve months and analysts' predictions of profitability this year reinforce the company's strong financial position.
The company's market performance has been remarkable, with a 193.19% price total return over the past year and a 158.01% return year-to-date. This exceptional performance is reflected in Vertiv trading near its 52-week high, with the current price at 97.64% of its 52-week high.
While Vertiv's P/E ratio of 80.5 suggests a high earnings multiple, the PEG ratio of 0.66 indicates that the stock may be undervalued relative to its growth prospects. This could support UBS's Buy rating and the potential for further share price appreciation.
For investors seeking more comprehensive analysis, InvestingPro offers 17 additional tips for Vertiv Holdings Co., providing a deeper understanding of the company's financial health and market position.
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