Industrials
Given his recent supply chain checks and conversations with industry players, Felix Wang believes the company’s liquid cooling backlog and revenue expectations are too high. While supply bottlenecks are improving, he is particularly worried about some of the new liquid cooling technology out there. As a result, VRT's price-cost tailwinds of >$65m for FY24 may become harder to achieve. Felix also argues VRT's relationship with Nvidia is not really a game-changer and tracking new data centre construction he notes the pace has slowed in 2Q24. The stock looks very expensive at 34x FY25 P/E and 23x EV/EBITDA. While the long-term picture of liquid cooling is constructive for data centres, there is uncertainty on when / how it will play out. 35% downside.
Edition: 191
- 26 July, 2024