Vertiv Holdings and JinkoSolar have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – March 26, 2024 – Zacks Equity Research shares Vertiv Holdings Co VRT as the Bull of the Day and JinkoSolar Holding Co., Ltd. JKS as the Bear of the Day. In addition, Zacks Equity Research provides analysis on ARM Holdings PLC Sponsored ADR ARM, Li Auto LI and Vulcan Materials VMC.
Here is a synopsis of all five stocks:
Bull of the Day:
Vertiv Holdings Co stock has doubled Nvidia over the last 12 months, driven by Wall Street’s insatiable appetite for AI-boosted growth.
Vertiv is not as flashy as Nvidia and other artificial intelligence darlings. Yet Vertiv’s portfolio of power, cooling, and IT infrastructure solutions and services could grow steadily for decades because AI and other technological advancements require practically endless, always-available data.
Vertiv’s job is to keep the computing power needed to drive the modern, digitally connected economy running as smoothly as possible around the clock.
VRT provides investors the opportunity to benefit from the AI-super cycle without picking artificial intelligence winners since Vertiv is a high-tech picks and shovels-type AI investment.
VRT’s Pitch: The World Runs on Big Data
The rapid rise of cloud computing, AI, cryptocurrencies, and cutting-edge technologies yet to come all require an increasingly enormous amount of data and energy. Vertiv’s pitch to potential customers and Wall Street is straightforward and compelling: “The world depends on the data we power and cool.”
Vertiv’s portfolio of power, cooling, and IT infrastructure solutions and services operates across data centers, communication networks, commercial and industrial facilities, and beyond. Vertiv’s product categories include critical power, thermal management, racks & enclosures, and monitoring & management.
The Ohio-based firm's services range from DC power and electrical reliability to safety and compliance. Vertiv’s clients include enterprises and small and medium-sized businesses across healthcare, telecom, tech, retail, education, and beyond.
Vertiv expects the push for greater energy efficiency across data centers will boost its liquid cooling technologies since more traditional air-cooling systems cannot as effectively cool new high-density racks jam-packed with CPUs and GPUs.
Vertiv is expanding inside the pre-fabricated/modular data industry, as data centers proliferate globally. Meanwhile, its micro data centers offer all-in-one solutions for power, cooling, monitoring, and racks.
VRT in December agreed to acquire liquid cooling infrastructure solutions firm CoolTera, bolstering its ability to support the deployment of AI at scale. Plus, Vertiv partnered with AI chip superstar Nvidia ((NVDA) to help solve future data center efficiency and cooling challenges.
The firm’s nearly two dozen global manufacturing plants are helping it ramp up production. Vertiv said last year that its “existing footprint was built with the idea that future growth would need to be accommodated.”
Growth Outlook
Vertiv, which went public via a SPAC in early 2020, posted 14% revenue growth during its first two full years. VRT grew its revenue by 21% in fiscal 2023.
The company's organic orders climbed by 23% in Q4 and it closed the year with a record backlog of $5.5 billion. CEO Giordano Albertazzi sees “tremendous opportunity ahead as the data center needs of AI drive additional market demand.”
Vertiv is projected to post 11% revenue growth in fiscal 2024 and nearly 10% higher sales in FY25 to climb from $6.86 billion last year to $8.34 billion next year.
VRT’s adjusted earnings are projected to soar by 33% and 24%, respectively. Vertiv is also boosting its adjusted free cash flow, which helps support the acceleration of its long-term capital deployment framework.
Vertiv’s post-Q4 release EPS revisions help it land a Zacks Rank #1 (Strong Buy) and mark the continuation of its improving bottom line outlook over the last year.
VRT’s FY24 consensus EPS estimate has jumped 80% over the last year from $1.31 a share to its current $2.35 per share, while its FY25 figure has soared by 112% ($1.38 to $2.92 per share).
Performance, Technical Levels & Valuation
Vertiv shares have surged by 325% during the last three years to outpace the S&P 500’s 31% and the Zacks Technology sector’s 35%. VRT has skyrocketed roughly 530% during the last 12 months to double Nvidia and blow away Tech 48%.
Vertiv trades solidly above its 21-day and 50-day moving averages, driven by a 72% YTD climb. VRT might be overheated in terms of RSI levels, and some investors might want to wait for a pullback.
That said, playing the market-timing game is not easy and can prevent long-term investors from buying great stocks at prices that could look like steals down the road even if they prove a tad pricey in the near term.
Vertiv trades at a discount to its Computers - IT Services industry at 33.2X forward 12-month earnings vs. 36.1X. That is solid bang for your buck since VRT has climbed 325% in the last three years vs. its industry’s 12% run.
Vertiv’s PEG ratio, which factors in its longer-term earnings growth outlook, sits at 1.2. This represents a 60% discount vs. its industry, 36% value vs. the Zacks Tech sector, and an 8% discount to Nvidia.
Bottom Line
Wall Street is bullish on Vertiv, with nine of the 10 brokerage recommendations Zacks has at “Strong Buys.” VRT appears worth considering as a way to gain exposure to the never-ending growth of data and, of course, the AI age.
Bear of the Day:
JinkoSolar Holding Co., Ltd. is one of the largest solar panel manufacturers in the world. JinkoSolar shares have tumbled alongside most of the solar industry over the last few years amid higher interest rates, tough-to-compete-against periods of expansion, and other headwinds.
JKS fell way short of our Q4 earnings estimate on March 20 and provided disappointing guidance.
JinkoSolar Basics
JinkoSolar makes various types of solar panels for different aspects of the market. The company sells residential rooftop solar panels, as well as high-performance systems for localized industrial and commercial energy production.
JinkoSolar benefited greatly from the Chinese government’s efforts to boost solar panel production in the country. JinkoSolar’s vertically integrated manufacturing process has helped it lower the costs of producing complicated, high-tech PV panels.
Solar went on a tear during Covid, spurred by government incentives, lower rates, and more. JKS expanded greatly since 2019, soaring from roughly $4.27 billion in sales to around $16.62 billion in fiscal 2023.
Still, JKS posted adjusted fourth earnings of $1.21 a share, missing our estimate by 47%. Worse yet, JinkoSolar’s downbeat guidance forced analysts to slash their earnings outlooks.
JinkoSolar’s first quarter consensus plummeted from +$2.10 a share before its March 20 release to a loss of -$0.44 per share. JinkoSolar’s FY24 consensus EPS estimate tumbled by 47%, with its FY25 outlook 30% lower.
JinkoSolar’s downward earnings revisions help it land a Zacks Rank #5 (Strong Sell) right now. “As module prices fell more than expected in the fourth quarter and nearly 50% of our modules were sold to the Chinese market at lower prices, gross margin for the fourth quarter decreased significantly to 12.5% from 19.3% in the third quarter,” CEO Xiande Li said in prepared remarks.
Bottom Line
JinkoSolar could be a long-term winner. The solar industry might be nearing a bottom because interest rates have likely peaked. Plus, solar is still projected to grow alongside the wider energy transition.
That said, JinkoSolar stock only performed well during the Covid boom. The stock is down 22% over the last 10 years. All in, it might be best for investors to stay away from JKS until it proves to Wall Street that a turnaround is on the horizon.
Additional content:
Global Week Ahead: Two Big IPOs in Europe and the PCE in the U.S.
In the Global Week Ahead, inflation signals from the United States, Australia and Japan are a key focus, for bond and stock traders alike.
This follows a deluge of central bank meetings last week. Ones that included a historic Bank of Japan (BoJ) rate hike.
This week, Sweden's Riksbank could add to drama around who cuts rates. Now that Switzerland has kicked off easing among big central banks.
Finally, Europe's IPO wheels are turning.
Next are Reuter’s five world market themes, reordered for equity traders:
(1) This Week, Two of the Biggest European IPO’s in the Last 12 Months Happen.
The launch of two of the biggest European initial public offerings (IPOs) of the last 12 months is in traders' sights.
The market wants some equity market success to unlock a vital cog in the financial system and spur more dealmaking.
CVC's perfume retailer Douglas raised around 850 million euros ($922.93 million). It priced its shares at bottom of an indicated range. They plummeted more than 12% on their debut on Thursday.
But skincare company Galderma (GALD), opens new tab priced its 2.3 billion swiss franc ($2.56 billion) IPO at the top of an indicated price range and soared on its first day trading Friday.
A good performance might help other companies follow suit, including CVC itself.
That should help release pressure building on private equity firms needing to exit investments, return capital and deploy funds.
(2) On Friday, watch out for the U.S. Personal Consumption Expenditure Price Index (PCE). The Fed’s preferred inflation measure lands.
A March 29th U.S. inflation reading is critical for markets after the Federal Reserve stuck with a view for rate cuts this year, even with a stronger economic outlook.
The February Personal Consumption Expenditures Price index is expected to show a +0.4% monthly increase, according to a Reuters poll. January's PCE index rose +0.3%, while the annual increase in inflation was the smallest in three years.
The Fed just upgraded its view on inflation - projecting that the PCE index excluding food and energy would rise at a +2.6% annual rate by year-end, compared with +2.4% in its December projections. It also lifted 2024 economic growth estimates.
Any suggestion in the data that inflation is picking up could dash hopes that Fed easing will start soon, with a go-slow approach likely to continue.
(3) What Other Moves Come from the World’s Central Banks?
Traders love a bit of excitement, and there has been plenty lately - a BOJ rate hike and a surprise Swiss cut.
The Swiss move, plus the Bank of England (BoE)'s hint at easing, means it is game on for June rate cuts from other big central banks.
Data and central-bank speak in coming days will be watched closely.
The question is the U.S. Fed. It is sticking with a plan for three rate cuts for now, but strong data and sticky inflation could derail that.
Where does that leave investors? They favor government bonds in Europe and selling currencies where rate differentials with the Fed are opening up.
No surprise that the Swiss franc slumped after Thursday's SNB cut and even the buoyant U.K. pound took a knock from a dovish BoE.
(4) In Asia-Pacific, the Reserve Bank of Australia (RBA) Sets Monetary Policy.
Just as the Reserve Bank of Australia (RBA) thought inflation was finally coming to heel and the time was ripe to tone down its tightening bias, blowout employment figures have delivered a nasty shock.
The RBA will likely watch Wednesday's inflation print for any upside surprises, given February's data will capture more price changes for a range of services - which has been declining at a slower pace than for goods.
Across Asia, any further easing of inflation in Singapore and neighboring Malaysia is unlikely to significantly sway policymakers, who are expected to keep monetary policy unchanged for some time.
Tokyo's consumer price figures caps off a data-light week for Japan on Friday. That may be met with less excitement given that the Bank of Japan, has finally now hiked rates for the first time in 17 years.
(5) In Europe on Wednesday, Sweden’s Central Bank, the Riksbank, Sets Policy.
Sweden's central bank, the world's oldest, is expected to keep its key rate unchanged on March 27th. But it could announce that a cut, the first since it began tightening policy in spring 2022, is nearing.
Headline inflation has slowed to near the Riksbank's 2% target and growth has ground to a halt as households and businesses struggle with rates at over 15 year-highs.
In February, the central bank said rates had peaked and that it could even start to ease policy in the first half of 2024.
Rate-setters remain worried, however, about the risks of setbacks - particularly the chance of a weaker Swedish crown if the Riksbank gets out of step with the ECB and U.S. Federal Reserve.
As a result, markets see a first rate cut in May or June.
Top Zacks #1 Rank (STRONG BUY) Stocks
(1) ARM Holdings PLC Sponsored ADR: This is a $133 stock in the Technology Services industry. The market cap is $135B. I see a Zacks Value score of F, a Zacks Growth score of C, and a Zacks Momentum score of F.
Arm Holdings plc (formerly an acronym for Advanced RISC Machines and originally Acorn RISC Machine) is a British semiconductor and software design company based in Cambridge, England.
Its primary business is the design of central processing unit (CPU) cores. Ones that implement the ARM architecture family of instruction sets.
Arm also designs other chips, provides software development tools under the DS-5, RealView and Keil brands, and provides systems and platforms, system-on-a-chip (SoC) infrastructure and software.
As a "holding" company, Arm also holds shares of other companies. Since 2016, it has been majority owned by Japanese conglomerate SoftBank Group.
Arm's main CPU competitors in servers include IBM, Intel and AMD.
(2) Li Auto: This is a $31 stock in the Foreign Auto industry. The market cap is $36.2B. I see a Zacks Value score of B, a Zacks Growth score of A, and a Zacks Momentum score of A.
Li Auto Inc. is a Chinese electric vehicle manufacturer headquartered in Beijing, with manufacturing facilities in Changzhou.
Founded by Li Xiang in 2015, the company mainly builds electric vehicles that use range extenders for a power supply.
This Chinese electric vehicle company debuted on the Nasdaq in 2020.
In 2022, Li Auto thoroughly refreshed its portfolio, implementing a new styling language and expanding the model range from the current one SUV Li One, to three completely new designs.
• The first of them was the flagship Li L9, which debuted in March.
• Then, in September of the same year, a shortened variant called Li L8 and
• An even smaller version Li L7 were presented, the only one without the third row of seats, as the basic model in the new range of the Chinese company.
Li Auto has vehicle manufacturing, engineering, and design services located in Changzhou, Jiangsu with corporate headquarters and research and development located in Beijing.
(3) Vulcan Materials: This is a $275 stock in the U.S. Building Products industry. The market cap is $35.9B. I see a Zacks Value score of D, a Zacks Growth score of C, and a Zacks Momentum score of A.
Vulcan Materials Company is engaged in the production, distribution and sale of construction aggregates and other construction materials in the U.S. and Mexico.
The company has four operating segments: Aggregates, Concrete, Asphalt Mix and Calcium.
• The Aggregates segment produces and sells aggregates like crushed stone, sand and gravel and other aggregates. The end users include public construction as well as private residential and private non-residential (manufacturing, retail, offices, industrial and institutional) construction.
• The Asphalt Mix segment produces and sells asphalt mix. Aggregates are a major component in asphalt mix.
• The Concrete segment deals with the production and sale of ready-mix concrete in various US sates. This segment functions as a customer of the Aggregates segment, as aggregates are a major component in ready-mix concrete.
• The Calcium segment produces calcium products for the animal feed, plastics and water treatment industries with high-quality calcium carbonate material.
Key Global Macro
Friday’s core PCE data, and Jerome Powell’s speech, are top market-moving events.
On Monday, U.S. new home sales for FEB should be 0.673M, rising from a prior month’s 0.661M.
On Tuesday, U.S. durable goods orders for FEB come out. Ex-defense orders should be up +1.0%, following a -7.3% prior monthly print in JAN.
On Wednesday, the influential Fed Governor Chris Waller speaks.
On Thursday, traders get to review the 2nd revision of U.S. Q1 real GDP growth. The ‘advance’ print was +3.2%.
On Friday, U.S. core and broad PCE measures hit the tape in the morning. The prior core reading was +2.8% y/y. The prior broad PCE reading was +2.4% y/y.
Fed Chair Jerome Powell speaks in the afternoon.
This is also the Good Friday holiday.
Conclusion
Here are Zacks Research Director Sheraz Mian’s four key Q1 EPS season hints:
(1) Expect total S&P500 earnings for Q1-24 to be up +2.1% from the same period last year, on +3.4% higher revenues.
This follows the +6.5% earnings growth, on +3.8% higher revenues in Q4-23.
(2) Estimates for Q1-24 have come down since the quarter began.
Though the magnitude of cuts compares favorably to what we experienced in the comparable period for the preceding quarter.
(3) The Tech and Energy sectors are having the opposite effects on the Q1-24 earnings growth pace.
The Energy sector is pulling it down, and the Tech sector providing a boost.
(4) For Q1-24, expect ‘Magnificent 7’ earnings to increase +33.4%, on +13.4% higher revenues.
Excluding the Mag 7 contribution?
Then, Q1-24 earnings for the rest of the S&P500 index would be down -3.6% from the year-earlier period (versus +2.1% growth otherwise).
Have a successful week trading and investing,
John Blank, PhD
Zacks Chief Equity Strategist and Economist
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
https://www.zacks.com
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
JinkoSolar Holding Company Limited (JKS) : Free Stock Analysis Report
Vulcan Materials Company (VMC) : Free Stock Analysis Report
ARM Holdings PLC Sponsored ADR (ARM) : Free Stock Analysis Report
Vertiv Holdings Co. (VRT) : Free Stock Analysis Report
Li Auto Inc. Sponsored ADR (LI) : Free Stock Analysis Report
