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Bull of the Day: Vertiv Holdings Co (VRT)

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Vertiv Holdings Co (VRT - Free Report)  is an artificial intelligence (AI) stock that’s soared 120% YTD and 940% in the past five years, blowing away the Tech sector during both stretches. Wall Street has fallen in love with Vertiv’s ability to grow no matter what companies eventually dominate AI.

Vertiv helps the computing power needed to drive the modern economy (data centers, AI, and more) run as smoothly as possible around the clock.

Vertiv is a picks-and-shovels AI and data center company working with Nvidia to help solve critical, behind-the-scenes challenges facing the rapid expansion of AI and its sustained growth.  

Vertiv posted another beat-and-raise quarter on October 23, driven by “robust underlying demand” for its critical digital infrastructure products and services across its entire “AI-enabling portfolio of power, thermal, IT systems, infrastructure solutions and services.”

The Bull Case for Vertiv Stock

Vertiv operates in the background of big tech and AI, supporting the constant expansion and the day-to-day operations of data centers, communication networks, and beyond. Vertiv’s hardware, software, analytics, and ongoing services portfolio is focused on power, cooling, and IT infrastructure.

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Vertiv’s business has never been more critical and in demand. The enormous expansion of data centers requires massive amounts of high-performance computing power that operates at peak performance 24/7.

Vertiv has partnered with the current titan of AI, Nvidia ((NVDA - Free Report) ), to help solve future data center efficiency and cooling challenges.

The picks-and-shovels AI and data center company posted a beat-and-raise third quarter on October 23. “Robust underlying demand for our critical digital infrastructure products and services” fueled its most recent quarter, according to Vertiv CEO Giordano Albertazzi.

Vertiv’s AI-Boosted Growth Outlook

Vertiv grew its revenue by 19% in the third quarter and its adjusted earnings by 46%. The company’s organic orders climbed ~37% over the trailing 12 months. Vertiv was “very encouraged by the acceleration of liquid cooling revenue” last quarter as more of its long-term pipelines grow.

Vertiv is bullish about its outlook across its entire portfolio, fueled by the rapid acceleration of AI spending. Nvidia, Meta, Alphabet, and tons of other companies are going all in on AI and Vertiv is prepared to ride that mega-trend for as long as it lasts.

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Vertiv’s earnings estimates climbed since its Q3 release, extending its impressive run of upward revisions over the last two years.

VRT’s improving bottom-line outlook helps it earn a Zacks Rank #1 (Strong Buy) and it has topped our EPS estimates for seven quarters running.

Vertiv is projected to grow its adjusted earnings per share (EPS) by 52% in FY24 and 30% in FY25 to climb from $1.77 a share in 2023 to $3.50 per share next year. Vertiv’s strong earnings growth outlook comes on top of its 230% expansion last year.

On the revenue front, Vertiv is projected to boost its sales by 14% in 2024, adding roughly $1 billion to the top-line. VRT is expected to follow up its 2024 growth with 16% stronger sales next year to pull in $9.08 billion vs. $6.86 in 2023.

Time for Traders and Long-Term Investors to Buy VRT Stock?

Vertiv stock has soared over 940% in the last five years to crush Tech’s 135%, Meta’s ((META - Free Report) ) 190%, and Alphabet’s ((GOOGL - Free Report) ) 160%. VRT shares have jumped 630% in the past two years and 120% YTD—blowing away Meta’s 60% 2024 run and Alphabet’s 22%.

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Vertiv stock has easily surpassed its highly-ranked Computers – IT Services industry over the past year, up 170% vs. 22%. Vertiv has pulled back slightly from its October records and trades 17% below its average Zacks price target.  

VRT’s recent pullback has cooled off the stock, taking Vertiv from heavily overbought RSI levels (a widely-tracked technical indicator focused on momentum) to below neutral.

VRT is trading slightly below its 21-day moving average. Any pullback to Vertiv's 50-day might offer traders a nice near-term entry point. That said, long-term investors shouldn’t attempt to time stocks exactly since it can leave them on the sidelines as they march higher and higher.

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On the valuation front, VRT trades at a 20% discount to its highs at 31.7X forward 12-month earnings.

Vertiv stock offers 14% value compared to its highly-ranked Computers - IT Services industry despite its huge outperformance. Vertiv has climbed 300% in the past three years to blow away its industry’s 5% decline.

Why Wall Street Loves Vertiv Stock

Vertiv’s proven behind-the-scenes portfolio benefits directly from the rapid expansion of data centers, AI, and other growth-focused technology investments like cryptocurrencies and bitcoin.

Given this simple backdrop, it is no wonder that all 12 brokerage recommendations Zacks has for Vertiv are “Strong Buys.”

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