On Thursday, Mizuho Securities reaffirmed its positive stance on shares of Vertiv Holdings Co. (NYSE: NYSE:VRT), increasing the company's price target to $125 from the previous $110, while maintaining an Outperform rating. The adjustment reflects Vertiv's robust performance, underlined by a beat and raise scenario, and expectations of accelerated organic growth in 2025.
The analyst at Mizuho highlighted Vertiv's momentum in the market, driven by strong execution and an optimistic outlook. The company is anticipated to experience faster organic growth in the coming year, with clear visibility into future operations. Vertiv's involvement in the liquid cooling sector is expected to be a significant, long-term cycle as it begins discussions with large enterprise clients.
The growth of artificial intelligence (AI) applications, which has been predominantly concentrated in the United States, is starting to gain traction internationally. Vertiv's comprehensive data center offerings have been outperforming, indicating a broader market reach and sustained demand.
In light of these positive trends, Mizuho has revised its earnings per share (EPS) forecast for Vertiv upward, setting the 2024 EPS at $2.70, up from $2.50, and the 2025 EPS at $3.25, increased from $3.00. Moreover, the firm has initiated its 2026 earnings estimate at $3.80.
The new price target of $125 takes into account a forward earnings multiple of approximately 27 times the firm's fully loaded 2026 earnings estimate of $4.50, inclusive of balance sheet deployment.
In other recent news, Vertiv Holdings Co. has been the subject of an optimistic outlook by Oppenheimer, which has maintained an Outperform rating and increased its price target from $115 to $121. Vertiv recently reported robust third-quarter earnings, surpassing both top and bottom-line expectations.
The company also provided guidance for Q4 2024, with EBIT and EPS midpoints exceeding analyst predictions. Furthermore, Vertiv revealed expectations for above-consensus organic growth for fiscal year 2025.
In the same vein, Vertiv's Q3 performance showcased a 19% increase in organic sales and a 37% growth in orders, leading to an adjusted operating profit of $417 million. This strong performance prompted the company to raise its full-year guidance, now expecting a 14% organic growth and $1 billion in adjusted free cash flow.
Vertiv also announced a partnership with NVIDIA (NASDAQ:NVDA) to co-develop power and cooling solutions and has plans to expand its liquid cooling capacity by 45 times by the end of 2023.
These developments indicate a promising trajectory for Vertiv, as noted by Oppenheimer and the company's management, which have expressed optimism about the growth potential in liquid cooling technology and the company's expanding pipeline.
However, the company's decision to stop providing order guidance might lead to less volatility in Vertiv's shares in the future, according to the analyst from Oppenheimer. Despite these changes, Vertiv remains confident in its strong order conversions and its position in the liquid cooling market.
InvestingPro Insights
Vertiv Holdings Co.'s strong market performance aligns with several key metrics and insights from InvestingPro. The company's revenue growth of 13.2% over the last twelve months, coupled with an impressive 18.99% quarterly revenue growth, supports Mizuho's optimistic outlook on Vertiv's accelerated organic growth.
InvestingPro Tips highlight that Vertiv is expected to grow its net income this year, which corresponds with Mizuho's upward revision of EPS forecasts. The company's profitability over the last twelve months and analysts' predictions of profitability this year further reinforce this positive trend.
Vertiv's market performance has been exceptional, with a 178.04% price total return over the past year and a 125.81% return year-to-date. This aligns with the InvestingPro Tip noting Vertiv's strong return over the last three months and large price uptick over the last six months.
While Vertiv is trading at a high earnings multiple according to InvestingPro Tips, its PEG ratio of 0.57 suggests it may still be undervalued relative to its growth prospects. This could explain Mizuho's decision to raise the price target to $125, which is close to the fair value of $125 based on analyst targets as reported by InvestingPro.
For investors seeking a more comprehensive analysis, InvestingPro offers 14 additional tips for Vertiv Holdings Co., providing a deeper understanding of the company's financial health and market position.
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