Melius Research upgraded data infrastructure company Vertiv Holdings’ (VRT) stock from Hold to Buy and increased the price target from $134 to $165. The investment firm stated that it upgraded VRT stock despite the recent uptick, “purely because capex risks have dissipated.” Vertiv stock was up by nearly 1% as of writing. It has risen about 13% year-to-date.
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Melius Turns Bullish on VRT Stock
Melius analyst Scott Davis’ revised price target indicates about 30% upside potential in Vertiv stock. The 4-star analyst believes that concerns about a slowdown in spending have faded and the “race to spend on AI seems back on track.” In fact, he thinks that AI spending has accelerated.
The analyst highlighted that Vertiv is a critical “picks and shovels” supplier to the AI ecosystem, in an industry that will continue to face supply shortages. He also noted the rise in Nvidia (NVDA) stock, which is nearing a $4 trillion market cap, and the jump in rival GE Vernova’s (GEV) stock. Chip giant Nvidia is Vertiv’s strategic partner. Vertiv’s infrastructure solutions, combined with Nvidia’s AI platforms, enable customers to deploy next-generation data centers that are needed for the most demanding AI workloads.
While Davis is not completely sure about how to value VRT stock, he expects it to benefit from a generational capex build cycle. Additionally, Davis is confident that Vertiv will develop a larger-than-expected aftermarket presence as its installed base expands. He also expects the AI infrastructure company to experience very high utilization rates and higher-than-expected replacement/upgrade cycles. “VRT just may transition from a capex story to a capex + annuitized aftermarket story within just 2-3 years,” concluded Davis.
Is VRT a Good Stock to Buy?
Overall, Vertiv Holdings stock scores a Strong Buy consensus rating based on 12 Buys and two Holds, thanks to the robust demand for its products amid the AI boom. The average VRT stock price target of $123.50 indicates a downside risk of 2.6% from current levels.
