After carrying the stock market higher over the last two years, Vertiv ((VRT) and Nvidia ((NVDA), two of the best performing stocks in the market, have been hammered lower by the recent stock market correction. Trade policy uncertainty, cutbacks on fiscal spending and a potential slowdown in the economy have investors feeling uneasy, adding to the volatility.Though it is impossible to know how long and how deep this correction will go, good investing principles don’t require us to predict what is going to h ...

It's been a while since data center equipment company Vertiv's (VRT 1.35%) stock looked like a great value, but that time has come around again. The ongoing demand for artificial intelligence (AI) applications creates unprecedented data growth, which only means more investment in data centers.The good news is that the broad-based sell-off in the Nasdaq Composite (^IXIC 0.81%) and some near-term negative news have brought stocks like Vertiv back into value range, and now could be a great time to buy the stoc ...

I am a full-time analyst interested in a wide range of stocks. With my unique insights and knowledge, I hope to provide other investors with a contrasting view of my portfolio, given my particular background.If you have any questions, feel free to reach out to me via a direct message on Seeking Alpha or leave a comment on one of my articles.Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the ...

Group 1 - The AI trade has experienced a decline following China's DeepSeek AI announcement in February, which significantly impacted the Information Technology, Utilities, and Industrials sectors [1] - Industries directly related to power-demand needs due to AI are particularly affected by this announcement [1] Group 2 - No relevant content available for this section.

Core Insights - Vertiv is positioned at the forefront of the increasing investment in data centers that are tailored for artificial intelligence applications [1] Group 1 - The company is experiencing a significant boom in demand due to the rise in spending on AI-optimized data centers [1]

Core Viewpoint - Vertiv's shares declined by 18.7% in February due to a sell-off in AI and data center stocks, compounded by disappointing fourth-quarter earnings [1] Group 1: Market Dynamics - The release of DeepSeek's cost-effective AI model raised concerns about potential negative revisions in AI-driven data center spending [2] - The sell-off affected various sectors related to data centers, including power generators and chip designers, but Vertiv's Executive Chairman argued that lower computing costs could lead to increased demand for data centers, which would benefit Vertiv [3] Group 2: Company-Specific Issues - Vertiv's trailing-12-month orders increased by 30%, and its backlog also rose by 30% at the end of 2024 compared to the end of 2023, but fourth-quarter orders were approximately flat compared to the same quarter last year [4][5] - The CEO acknowledged delays in EMEA orders due to regulatory changes and slower decision-making processes, which may be linked to new energy-efficiency regulations set to take effect in 2025 [5] - The current situation may reflect order delays rather than a decrease in end demand, suggesting that orders could still be fulfilled in the future [6]

Core Viewpoint - Vertiv (VRT) shares have declined 24% year to date, underperforming the broader Zacks Computer and Technology sector and the Zacks Computers - IT Services industry, both of which have seen a 6% decline [1][2]. Company Performance - VRT shares are currently considered overvalued with a Value Score of C, trading at a 12-month price/book ratio of 13.51, which is higher than its median of 11.22 and the sector's 9.83 [5]. - Technically, Vertiv shares are trading below the 50-day and 200-day moving averages, indicating a bearish trend [8]. Growth Prospects - Vertiv's extensive product portfolio, including thermal systems, liquid cooling, UPS, switchgear, busbar, and modular solutions, is enhancing its growth prospects. The backlog at the end of 2024 was $7.18 billion, reflecting a 30% increase over 2023 [12]. - The company has seen organic orders grow approximately 30% in the trailing 12 months, with a book-to-bill ratio of 1.2 times for 2024 [12]. - Strong capital expenditure plans by hyperscalers for data center capacity expansion are favorable for Vertiv, supported by a rich partner base including companies like NVIDIA and Intel [14]. Acquisitions and Innovations - Vertiv has been proactive in acquisitions, recently acquiring centrifugal chiller technologies from BiXin Energy Technology, which enhances its solutions for high-performance computing and AI [15]. Financial Outlook - For 2025, Vertiv expects organic sales growth between 15% and 17%, with net sales projected to be between $9.13 billion and $9.28 billion, indicating a year-over-year growth of 15.07% [16][17]. - Adjusted operating profit for 2025 is expected to be between $1.91 billion and $1.96 billion, with an adjusted operating margin anticipated to be 20.8-21.2% [17]. - Adjusted earnings for 2025 are expected to be between $3.50 and $3.60 per share, with a consensus estimate of $3.59 per share, indicating a year-over-year growth of 25.96% [18]. Quarterly Estimates - For Q1 2025, adjusted earnings are expected to be between 57 cents and 63 cents per share, with a consensus estimate of 62 cents per share, reflecting a year-over-year growth of 44.2% [19]. - Net sales for Q1 2025 are projected to be between $1.9 billion and $1.95 billion, indicating a year-over-year growth of 16.9% [19]. Conclusion - Vertiv is benefiting from a strong portfolio and a rich partner base, driving order growth. The solid top-line growth potential justifies a premium valuation, with a Zacks Rank 2 (Buy) and a Growth Score of A, indicating a strong investment opportunity [21].

Group 1: Stock Performance - Shares of AI-related companies such as Taiwan Semiconductor Manufacturing (TSMC), Arista Networks, and Vertiv Holdings experienced significant declines, with TSMC down 4.19%, Arista down 7.57%, and Vertiv down 10.26% as of 3:52 p.m. ET [1] - Nvidia, a key player in the AI sector, also saw a decline of approximately 9.8% during the same period, impacting related stocks [1] Group 2: Economic Factors - The decline in stock prices is attributed to broader economic factors, including the imminent tariffs on Canada, Mexico, and China, which were confirmed by President Donald Trump [2][3] - Concerns over stagflation, characterized by slowing economic growth and rising prices, were heightened by the ISM Manufacturing Survey, which reported a manufacturing index of 50.3, lower than January's 50.9 and below economists' expectations of 50.8 [4][5] Group 3: Industry-Specific Concerns - The manufacturing employment index fell to 47.6 from 50.3, indicating potential job losses in the sector, which could further exacerbate fears of stagflation [5][6] - Renewed concerns over the sustainability of Nvidia's growth were noted, particularly in light of reports that China has been circumventing U.S. export controls to procure Nvidia chips [7][8] Group 4: TSMC's Investment and Market Sentiment - TSMC announced a $100 billion investment in the U.S., which, while potentially positive, raised concerns about the necessity of such capacity and the lack of subsidies associated with the investment [10][11] - The announcement was perceived as a strategy to mitigate tariff threats on Taiwan, where TSMC's production is primarily based [10] Group 5: Geopolitical Context - The semiconductor industry is heavily influenced by geopolitical factors, with the potential for stricter export controls on semiconductors looming [9][13] - The importance of securing AI supremacy is emphasized, suggesting that companies delivering value in this space may see growth in the medium term despite current market volatility [14]

Order Backlog and Demand - Vertiv's estimated combined order backlog was $7.2 billion as of December 31, 2024, up from $5.5 billion in 2023, indicating strong demand for its products and services [79]. - The majority of the order backlog is expected to be delivered within one year, but customers have the right to reduce or defer orders, impacting revenue realization [79]. Market and Competitive Landscape - The company relies on the growth of data centers and communication networks, with any decrease in demand potentially leading to reduced product offerings [76]. - Long sales cycles and unpredictable customer orders may cause significant revenue fluctuations from quarter to quarter, impacting future operational results [78]. - The company faces competitive pressures from large-scale global competitors, including Schneider Electric and Eaton Corporation, which may affect pricing and market share [89]. Operational Risks - Vertiv's operations are subject to various risks related to supply chain management, including volatility in raw material prices and potential shortages [90]. - The company faces significant risks related to cybersecurity incidents, which could harm business operations, reduce revenue, and increase expenses [95]. - The implementation of new information systems and enhancements may be costly and disruptive, potentially impacting forecasting, order processing, and overall business operations [99]. - The company faces significant risks related to fluctuations in foreign currency exchange rates, which could adversely impact revenue growth if the U.S. dollar strengthens against primary foreign currencies [139]. - The company’s manufacturing facilities are subject to various risks, including natural disasters and political unrest, which could disrupt production and lead to loss of sales [115]. - Operations in emerging markets present specific risks, including political instability and inadequate infrastructure, which could negatively impact business performance [108]. Financial Performance and Debt - The company reported approximately $2,097.0 million of senior secured indebtedness under the Term Loan Facility and $850.0 million of Senior Secured Notes due 2028 [143]. - The company has the ability to draw upon an undrawn portion of its $800.0 million ABL Revolving Credit Facility, subject to customary borrowing base and other conditions [145]. - The company may incur additional debt in the future, which could intensify existing risks and affect its ability to meet debt obligations [145]. - The company reported a principal amount of $2,097.0 million on the Term Loan, due 2027, with a borrowing rate of 6.19% as of December 31, 2024, compared to $2,118.1 million at a rate of 7.97% in 2023 [254]. - Cash and cash equivalents increased to $1,227.6 million in 2024 from $780.4 million in 2023 [254]. Compliance and Regulatory Risks - Contracts with governmental customers may impose additional risks and pressures, including audits and potential penalties, which could limit revenue [83]. - Changes in domestic or global tax provisions, including the implementation of the OECD's global minimum tax framework, could significantly impact the company's effective tax rate and financial performance [103]. - The company is subject to anti-corruption laws, and failure to comply could disrupt business operations and lead to significant penalties [120]. - Non-compliance with evolving data privacy laws like GDPR and CPRA may result in substantial fines and reputational damage, impacting financial results [119]. - Future legislation on cybersecurity, data privacy, and critical infrastructure could impose additional costs and disrupt customer markets, adversely affecting business operations [118]. - Environmental regulations may require costly compliance measures, impacting operational costs and financial condition [130]. - Increasing scrutiny on ESG-related matters could damage the company's reputation and adversely impact financial results if expectations are not met [134]. Strategic Initiatives and Challenges - The company has undertaken rationalization and restructuring initiatives to reduce costs and improve efficiency, but there is no assurance that expected benefits will be fully realized [101]. - The company must anticipate technology shifts, such as the growth in artificial intelligence, to remain competitive and meet evolving customer needs [93]. - The company’s business plan is dependent on access to funding through capital markets, and volatility in these markets could adversely impact its financial results [151]. - The company must attract and retain key employees to successfully implement its business plans, which may be challenging in a competitive market [158]. Intellectual Property and Legal Risks - The company relies on a substantial portfolio of intellectual property rights, and failure to protect these rights could negatively impact business performance [126]. - The company faces risks related to third-party claims of intellectual property infringement, which could lead to costly legal battles and operational disruptions [128]. - Legal claims and proceedings may result in significant costs and adversely affect business operations and financial condition [125]. Economic and Geopolitical Factors - Global macroeconomic conditions, including inflation and supply chain constraints, could adversely impact the company’s demand and financial performance [157]. - Geopolitical tensions, such as the conflict in the Middle East and the invasion of Ukraine, may lead to increased inflation and market disruptions, negatively impacting financial conditions and operating results [117]. Financial Controls and Reporting - The company has had material weaknesses in internal control over financial reporting in the past, which could affect its ability to accurately report financial information [141]. - The company incurs significant costs related to compliance with public company regulations, which may divert management attention from operational matters [163].

JR Research is an opportunistic investor. He was recognized by TipRanks as a Top Analyst. He was also recognized by Seeking Alpha as a "Top Analyst To Follow" for Technology, Software, and Internet, as well as for Growth and GARP. He identifies attractive risk/reward opportunities supported by robust price action to potentially generate alpha well above the S&P 500. He has also demonstrated outperformance with his picks. He focuses on identifying growth investing opportunities that present the most attracti ...