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On Wednesday, shares of Vertiv Holdings Co. (NYSE:VRT) experienced a decline of approximately 6%, following commentary from TD Cowen that suggested potential headwinds for the company’s equipment order volumes in the first half of 2025. The stock, which has seen a -19.36% YTD return and trades at a P/E ratio of 69, continues to show significant volatility. According to InvestingPro data, Vertiv maintains strong financial health with a current ratio of 1.65 and operates with moderate debt levels. The firm’s analysis pointed to industry trends that could negatively impact Vertiv’s business in the near term.
TD Cowen’s insights were based on channel checks at industry events NVIDIA (NASDAQ:NVDA) GTC and DCD Connect, which indicated an overall increase in data center demand year-over-year. Despite this growth, more lease cancellations and deferrals by Microsoft (NASDAQ:MSFT) than initially anticipated have allowed companies like Google (NASDAQ:GOOGL) and Meta (NASDAQ:META) to backfill capacity. These developments, however, have not translated into immediate benefits for Vertiv, though the company has demonstrated solid revenue growth of 16.74% over the last twelve months. InvestingPro subscribers can access 12+ additional exclusive insights about Vertiv’s market position and growth prospects.
The report highlighted that hyperscalers, major companies operating extensive networks of data centers, are redesigning their facilities to support higher rack densities. This shift is driving a slowdown in data center equipment purchasing as these companies iterate on their infrastructure. Microsoft, for example, is finalizing a liquid-to-liquid cooling solution for data centers, and Google is reportedly advancing in its redesign efforts. Such redesigns necessitate specific types of equipment that cannot be ordered until the final designs are established.
TD Cowen’s supply chain checks have revealed that the decision-making process for data center equipment purchases has been delayed, with orders for leased hyperscale capacity being pushed back by one to two quarters. Additionally, third-party data center operators are warehousing equipment to speed up future market delivery, which may create a short-term gap in equipment ordering.
This anticipated slowdown in equipment orders, as described by TD Cowen, is expected to have a negative impact on Vertiv’s order volumes for the first half of 2025. With the next earnings report due on April 23, 2025, and analysts maintaining a strong buy consensus with targets ranging from $99.50 to $165, investors are closely watching the company’s performance. The firm’s analysis suggests that until the new data center designs are implemented and the specific equipment needs are clarified, companies like Vertiv may face challenges in securing orders. For comprehensive analysis of Vertiv’s future prospects, including detailed financial metrics and expert insights, check out the full research report available on InvestingPro.
In other recent news, Vertiv Holdings Co. reported impressive financial results for the fourth quarter of 2024, showcasing a 27% organic growth rate and a 13% profit surpass. These results exceeded expectations in sales, margins, and free cash flow, marking a strong finish for the year. Additionally, Vertiv launched several new products aimed at enhancing AI applications in data centers, including the Vertiv™ Unify software and the CoolLoop Trim Cooler, which promise significant improvements in system performance and energy efficiency. The company also announced a strategic partnership with Tecogen Inc (OTC:TGEN). to market and sell Tecogen’s chillers for data center cooling, expanding its reach in this growing market. Meanwhile, JPMorgan maintained its Overweight rating on Vertiv, with a price target of $132, citing the company’s robust performance and positive outlook. The firm’s analysis suggests confidence in Vertiv’s ability to meet or exceed earnings expectations in the near future. These developments reflect Vertiv’s ongoing efforts to address the evolving demands of AI-driven data centers and reinforce its position in the industry.
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