On Tuesday, an analyst from Evercore ISI maintained an Outperform rating on shares of Vertiv Holdings Co. (NYSE:VRT) with a $105.00 price target. The analyst highlighted Vertiv's addition to the firm's Tactical Outperform list before the company's announcement of second-quarter results, scheduled for Wednesday, July 24, before the market opens.
The decision is influenced by robust artificial intelligence (AI) and server market indicators, such as Nvidia (NASDAQ:NVDA)'s recent performance and upward revisions to IDC's server forecast. Despite Vertiv's stock underperformance compared to the S&P 500 and AI-focused companies since its first-quarter results, the analyst anticipates the stock could rise on better-than-expected second-quarter outcomes.
Vertiv is expected to report moderate upside when it releases its June quarter results, supported by strong Q2 data center infrastructure spending, especially in AI. However, the spotlight will likely be on the company's order trajectory and potential revenue acceleration in calendar year 2025 (CY25).
With positive investor sentiment around AI, expectations for year-over-year growth are high, but the current consensus for the September quarter revenue estimates is considered conservative, with a modest sequential increase. The analyst predicts Vertiv will offer third-quarter guidance that meets or exceeds market expectations.
From an order standpoint, a mid-single-digit sequential decrease is anticipated for the June quarter after a strong Q1, but year-over-year, orders are expected to be significantly higher, in the 35-40% range. The company's momentum in orders is forecasted to outpace revenue performance, setting the stage for a second-half acceleration as AI infrastructure spending increases.
Notable factors contributing to this outlook include AI infrastructure's contribution to second-quarter results, progress on capacity expansion for liquid cooling, an anticipated acceleration in hyperscale capital expenditures, and positive year-over-year pricing providing tailwinds.
Additionally, the backlog and orders are projected to exceed revenue growth, albeit likely lower quarter-over-quarter. Margin improvements are also expected as Vertiv benefits from operational expense scalability. While enterprise IT shows signs of improvement and the server forecast for calendar year 2024 has been raised, service provider capital expenditures remain soft and challenges in China may continue.
Overall, the year-over-year order trajectory is expected to remain robust, and the analyst expressed a positive outlook on Vertiv's positioning in the AI data physical infrastructure market, suggesting AI could drive a multi-year upcycle in physical infrastructure spending.
In other recent news, Vertiv Holdings Co. demonstrated a robust financial performance in the first quarter of 2024, with an 8% increase in sales and a significant surge in orders across all regions. The company's adjusted operating profit reached $249 million, and the company initiated a share repurchase program while raising its full-year guidance to predict a 12% organic growth and operating margins of 17.7%.
Oppenheimer increased its price target for Vertiv to $98, following the company's impressive performance that surpassed analysts' expectations. Evercore ISI also raised its price target for Vertiv to $105, maintaining an Outperform rating and highlighting the company's comprehensive solutions as a key advantage. Similarly, Citi kept a 'Buy' rating on Vertiv's stock, emphasizing the company's strong standing in thermal and power sectors, including liquid cooling technologies. RBC Capital upheld an 'Outperform' rating for Vertiv, appreciating the successful introduction of the company's AI-driven business outcomes platform.
InvestingPro Insights
As Vertiv Holdings Co. (NYSE:VRT) gears up to announce its second-quarter results, investors are eyeing the company's performance with keen interest. According to InvestingPro data, Vertiv boasts a market capitalization of $32.9 billion, signaling a substantial presence in the industry. Despite a high P/E ratio of 83.3, the company's PEG ratio stands at an attractive 0.34, hinting at potential growth relative to earnings. Furthermore, Vertiv's revenue growth over the last twelve months has been impressive at 15.27%, underscoring the company's strong financial trajectory.
InvestingPro Tips suggest that Vertiv's net income is expected to grow this year, and the company is trading at a low P/E ratio in relation to near-term earnings growth, which may appeal to value investors. Moreover, with analysts predicting profitability for the current year and a large price uptick over the past six months, Vertiv's stock movements have captured the market's attention. For readers interested in further insights, there are 15 additional InvestingPro Tips available, which can be accessed for Vertiv at https://www.investing.com/pro/VRT. To enhance your investment analysis, use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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