Vertiv Holdings is Tuesday's pick for IBD 50 Stocks To Watch as the stock tests an important chart level that offers a new entry.
The company develops infrastructure and cooling systems for data centers. It also makes power systems and provides battery energy storage. Data centers — which handle massive computing needs for artificial intelligence applications — generate a large amount of heat that requires a cooling system.
Vertiv also serves the health care, manufacturing, rail, and oil and gas industries in over 130 countries.
The stock holds the No. 1 spot out of 48 stocks in the Electrical-Power Equipment industry group, which ranks No. 82 out of the 197 industry groups Investor's Business Daily tracks.
Vertiv Stock Adds To Pullback
Shares sank more than 2% Tuesday following Monday's 5.7% drop. That took the stock almost to its 10-week moving average. But the pullback to the line offers a possible entry at around 121.75, the current value of the 10-week average, according to its MarketSurge weekly chart.
A rebound from the 10-week line would offer a chance to buy the stock, or to add shares if investors already acquired the stock.
Shares reached a record high on Nov. 21, before retreating. This followed the stock's 14.5% jump after the company had its Investor Day on Nov. 18. The same day, it announced a collaboration with Compass Datacenters on a liquid and air cooling system for artificial intelligence applications.
The stock has hit profit targets from a cup base with a 109.27 entry as well as from a minor handle buy point at 103.69.
Vertiv stock holds a 96 IBD Relative Strength Rating and has climbed around 162% so far this year.
Robust Profit Growth Expected To Continue
Vertiv beat third quarter adjusted earnings and sales estimates on Oct. 23. It also raised its full-year adjusted profit and revenue guidance, topping views.
Its profit increased 46% for a second straight quarter. EPS surged 100% and 79% the previous two quarters.
Profit forecasts show the trend to continue for the next two quarters, with earnings projected to rise 45% then 49%.
Analysts have moved up their 2024 profit estimates to a 51% rise, followed by a 34% increase in 2025.
Sales growth has mostly been in the teens with an outlier of 8% growth three quarters ago. Revenue forecasts show an average 16% lift over the next four quarters.
Mutual funds have been gobbling up the stock, with 1,850 owning Vertiv in September, up from 1,788 in June and 1,476 in March. A handful of high-performing IBD Mutual Fund Index names own shares, including Fidelity Contrafund (FCNTX) and JPMorgan Large-Cap Growth Fund (SEEGX).
It boasts near-perfect 98 Composite and Earnings Per Share Ratings.
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