Wolfe Research Reiterates Outperform Rating on Vertiv Holdings Co. (VRT)

Wolfe Research analyst Nigel Coe reiterated an Outperform rating and $155.00 price target on Vertiv Holdings Co. (NYSE: VRT)

The analyst comments "As we write, VRT is trading down ~6% with many other DC-infrastructure levered stocks also underperforming (most notably NVT, down 2-3%) following a CNBC story that Amazon Web Services (AWS) is adopting its own proprietary designs for its NVIDIA Blackwell-enabled service offerings. Clearly, the liquid cooling ramp-up is a key component of the growth frameworks for both companies, and the concern is that announcement marks a potential disintermediation. The reality is that hyperscaler customers adopting their proprietary designs, for their own bespoke server requirements, is not a new development. In fact, it is quite routine. Moreover, AWS seems to have opted for a relatively standard Liquid to Air (L2A) system, which is a fairly common technology option for existing rack retrofits, and quite a standard design across the major suppliers. These modified technology options are typically supplied by the traditional rack thermal management suppliers, like VRT and NVT. How do we know that AWS is not planning to manufacture its own equipment? Quite simply, because they would be incapable of supplying these units at the same price point or even in a more timely manner, leaving aside the extreme difficulty of setting up and managing a complex global supply chain that would entail thousands of suppliers, and then hiring the labor to manufacture what would be relatively small batch runs. It simply does not make sense and hence they will continue to rely on their infrastructure partners to supply this equipment. How do we know that AWS is not going with a contract manufacturer that could disrupt the infrastructure market? We do not. But Asian ODMs appear to be far less competitive in a world of US tariffs (China & S. Korea tariffs have been proposed at 25%) and these suppliers lack the data center systems integration and service support that is so critical. So, we do not know which company will win what share of a hyperscaler's requirement (typically subject to non-disclosure agreements) and so this is a risk worth monitoring. But, we believe that VRT (and NVT) is well positioned to win its fair share of the market. So in our view, nothing has changed relative to what we knew (or thought we knew) coming into the office this morning. In fact, one could argue that the AWS announcement (see video HERE) can be viewed as a positive, since it confirms that the hyperscalers are going "all in" on liquid cooling and are retrofitting existing infrastructure as they accelerate time to market. Bottom line, we would be surprised if this move marks a renewed and prolonged bout of risk-reduction, and hence would be buyers on weakness. VRT trades at ~25x 2026e P/E, with NVT at ~19x."

For an analyst ratings summary and ratings history on Vertiv Holdings Co. click here. For more ratings news on Vertiv Holdings Co. click here.

Shares of Vertiv Holdings Co. closed at $128.37 yesterday.

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