Vertiv Holdings Co (VRT) - Analysis

Vertiv brings together hardware, software and services to address critical challenges in data centers, communications networks and industrial facilities. It focuses on advanced technology, including liquid cooling and power distribution solutions.

Vertiv solves the key challenges facing today's data centers, communications networks, and commercial and industrial facilities with a portfolio of power, cooling, and IT infrastructure solutions and services that extend from the cloud to the edge of the network.

Currently, most data centers use fans to circulate air to keep temperatures low. However, more powerful chips will push the limits of such air cooling systems.

One way to get around this is to run liquid coolant through pipes through the servers to absorb heat. The liquid has a higher heat capacity and transfers heat faster.

More efficient cooling systems also allow data centers to place servers closer together.

Goldman Sachs estimates that the server cooling market, which was $4.1 billion this year, will reach $10.6 billion in 2026. According to the bank's forecast, liquid cooling will become more popular in this market, with the penetration rate reaching 57% among AI servers in 2026, up from 23% this year.

Headquartered in Westerville, Ohio, USA, Vertiv operates in more than 130 countries.

The company is increasing its capacity to meet the growing demand for next-generation data centers.

Reported first quarter 2024 results led to an increase in full-year expectations for organic revenues. Vertiv is targeting approximately 13% annual revenue growth due to strong demand.

It has demonstrated strong growth expectations, with orders increasing by 60% in the first quarter of 2024 compared to the same period of the previous year and a 200 basis point increase in organic revenue growth expectations for the whole year.

Vertiv expects full-year 2024 revenue in the range of $7.54 billion to $7.69 billion, beating the previous forecast. This prediction seems very likely, given the company's market leading position in data center power and cooling solutions.

Vertiv finished 2022 with an adjusted operating margin of 15.3%. The margin forecast for this year already indicates an upper limit of approximately 18%. Given this assessment, Vertiv's potential to achieve 20% adjusted operating margin in 2025 appears high.

The company plans to allocate $200 million in capital expenditures (CapEx) for this year and stay within the CapEx margin range of 2.5% to 3%.

Of course, in addition to all these, reducing long-term debts is also of great importance for a stronger outlook.

My review: Vertiv is a global leader in data center power and cooling solutions. Considering how much the need for data centers will grow, I think it has more room to go. However, the share value has become expensive quickly, and this must be taken into consideration.

The information, comments and recommendations contained herein are not within the scope of investment consultancy. Investment consultancy services are provided within the framework of the investment consultancy agreement to be signed between brokerage firms, portfolio management companies, banks that do not accept deposits and customers. The comments in this article are only my personal comments and these comments may not be appropriate for your financial situation and risk return. For this reason, investments should not be made based on the information and comments in my articles.

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