VRT Vertiv
Excellent AI cooling and power franchise, but even after the selloff the price assumes a perpetual boom.
The story
Vertiv supplies the thermal management, power distribution and UPS systems that AI data centers can't run without, and its installed base, service network and liquid-cooling know-how give it a real but contestable edge. It is in a high-growth phase driven by the hyperscaler capex cycle. That cycle is cyclical and concentrated, and Schneider, Eaton and new cooling entrants will pressure margins as the category matures. The 30%+ share price pullback reflects worries about the cycle; the business fundamentals have not deteriorated.
I kept every prior driver: TTM revenue of 11.48B and an 18.9% margin are consistent with the old story of about 20% near-term growth and a margin that converges to a 22% industry-leading level but stops short of a peak. Sales-to-capital of 1.67 matches the prior 1.65. The 10-year horizon reflects a long AI buildout runway, but this is an industrial supplier, not a franchise-grade moat. The lower price narrows the gap to value without changing the drivers.
Value drivers
| Revenue growth (Y1) | 20.0% |
| Terminal growth | 3.0% |
| Forecast horizon | 10y |
| Target operating margin | 22.0% |
| Years to target margin | 7 |
| Sales-to-capital | 1.65 |
| Beta | 1.25 |
| Failure probability | 1.0% |
| Cost of capital (WACC) | 10.6% |
| Terminal WACC | 9.6% |
Valuation bridge
| PV of explicit FCFF | 13.69B |
| PV of terminal value | 26.17B |
| Equity value | 38.29B |
| ÷ shares → per share | $99.46 |
News
bearish -0.30 · 8 articles
- Western Digital Stock Is Just One Of 3 Top AI Infrastructure Picks
- 2 Data Center Stocks That Could Help Make You a Fortune
- How Much Further Could Vertiv Stock Fall?
- How to Play VRT Stock as Vertiv Acquires King Environmental Services
- Vertiv and 6 More AI Industrial Stocks to Buy Now
- Vertiv Holdings Co (VRT) Shares Drop Into Securities Probe After Q2 Miss
- Why Vertiv Holdings Co (VRT) Is Back In The Spotlight
- Is It Worth Investing in Vertiv (VRT) Based on Wall Street's Bullish Views?
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 13.78B | 20.0% | 19.3% | 2.04B | 1.39B | 644.37M | 582.38M |
| 2 | 16.27B | 18.1% | 19.8% | 2.46B | 1.51B | 948.20M | 774.54M |
| 3 | 18.91B | 16.2% | 20.2% | 2.92B | 1.60B | 1.32B | 977.82M |
| 4 | 21.62B | 14.3% | 20.7% | 3.42B | 1.64B | 1.77B | 1.18B |
| 5 | 24.31B | 12.4% | 21.1% | 3.93B | 1.63B | 2.30B | 1.38B |
| 6 | 26.88B | 10.6% | 21.6% | 4.43B | 1.56B | 2.88B | 1.57B |
| 7 | 29.21B | 8.7% | 22.0% | 4.92B | 1.41B | 3.50B | 1.73B |
| 8 | 31.19B | 6.8% | 22.0% | 5.25B | 1.20B | 4.05B | 1.80B |
| 9 | 32.71B | 4.9% | 22.0% | 5.51B | 924.02M | 4.58B | 1.84B |
| 10 | 33.69B | 3.0% | 22.0% | 5.67B | 594.73M | 5.08B | 1.85B |
Key risks
- Hyperscaler capex pause or digestion phase compresses orders and backlog
- Competitive pressure from Schneider, Eaton and liquid-cooling specialists erodes pricing
- Customer concentration and tariff or supply-chain cost inflation squeeze margins
Catalysts
- Order and backlog growth plus book-to-bill above 1 in upcoming quarters
- Liquid-cooling adoption and bolt-on deals like King Environmental expanding service revenue