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Investing.com -- Wall Street analysts are turning bullish on Legence Corp as growing demand for data centers boosts prospects for the mechanical, electrical and plumbing services provider.
Stifel, Bernstein and Rothschild all started coverage on Legence with Buy ratings given its outsized exposure to the fast-growing data center market and recurring revenue streams from existing buildings. Jefferies launched with a Hold.
Stifel set a price target of $36, saying Legence is “well positioned to benefit from growing data center demand,” which accounted for about 23% of its 2024 revenue.
The brokerage expects that share to rise in 2025 as AI data centers, which require more complex mechanical systems, drive demand for the company’s services.
Bernstein said Legence sits “at the intersection of key mega themes,” including the buildout of energy-efficient infrastructure and a skilled labor shortage.
It set a $38 target, implying 24% upside, and forecast an 11% annual revenue and EBITDA growth through 2027, faster than peers.
Rothschild also initiated with a buy and a $35.50 target, pointing to the company’s mix of engineering, installation and maintenance services, which give it exposure to both high-growth new construction and steady efficiency upgrades in existing buildings.
Legence, which went public earlier this year backed by Blackstone, provides design, engineering and maintenance for large infrastructure projects.
Its strong foothold in data center hubs like Northern Virginia and Northern California has made it a popular “picks and shovels” play on the AI infrastructure boom, analysts said.
However Jefferies flagged that near-term margin gains and free cash flow generation remain below average, which could limit multiple expansion despite strong topline growth. It set a $34 price target.