"AI liquid cooling leader" Vertiv's earnings report significantly exceeded expectations. JPMorgan Chase: Despite the huge increase, demand for data centers has accelerated from "light speed" to "absurd," and the valuation remains reasonable

Author: Long Yue

Source: Hard AI

As a key supplier of power and cooling solutions for data centers, Vertiv is riding the wave of AI to enter an unprecedented growth fast lane.

The latest third-quarter performance report from "AI liquid cooling leader" Vertiv shows that its key indicators, including sales, profit margins, and earnings per share, have all achieved better-than-expected growth. Sales reached $2.676 billion, a year-on-year increase of approximately 28%, exceeding the company's guidance upper limit. The adjusted earnings per share were $1.24, far surpassing the market's general expectation range of $0.94 to $1.00.

Even more noteworthy is that, according to a report released by JP Morgan on October 23, Vertiv's quarterly new orders surged approximately 60% year-on-year, with the order-to-shipment ratio rising to 1.4 times, driving its total backlog to a record $9.5 billion. This strong momentum prompted the bank to raise Vertiv's target price from $206 to $230, maintaining an "overweight" rating.

JP Morgan stated that Vertiv's performance, especially the strong momentum in its orders and backlog, is the biggest highlight of the financial report. The bank's analyst C. Stephen Tusa, Jr pointed out that the demand cycle for data centers seems to be evolving from "light speed" to "ludicrous speed."

JP Morgan: Huge upside potential, 2027 performance may exceed consensus by 50%

Analysts believe that although Vertiv's stock price has risen significantly this year, its risk-reward profile remains highly attractive.

The company's substantial backlog provides a solid foundation for performance in the coming years. JP Morgan's analysis model shows that while its earnings per share forecasts for Vertiv in 2026 and 2027 are already 15-20% higher than market consensus, they see a "reasonable optimistic scenario."

In this scenario, based on the company's large backlog and continuously strong project pipeline, its earnings per share in 2027 could reach $9, which is 30-50% higher than the current market consensus.

Valuation is high but reasonable, growth prospects are key

Vertiv's stock price has performed exceptionally well over the past year, and its valuation is at a relatively high level within the industry. However, JP Morgan believes that this premium is justified.

The report analyzes that from the perspective of the price-to-earnings ratio relative to earnings growth rate, considering its industry-leading growth prospects, Vertiv's valuation remains one of the "cheapest."

JP Morgan emphasizes that the market consensus may still underestimate Vertiv's growth potential. The bank points out that based on its own forecasts, Vertiv's price-to-earnings ratios for 2026/2027 are 31x/25x, which is lower than the market consensus of 36x/31x; in its optimistic scenario, the price-to-earnings ratio would further drop to 28x/20x, making the valuation even more attractive.

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