Why Vertiv Stock Was Wilting This Week

Investor sentiment in data center infrastructure specialist Vertiv (NYSE: VRT) was affected mid-week by an analyst's recommendation downgrade. With that tailwind, Vertiv's shares were slumping by almost 15% week-to-date in mid-session action on Friday, according to data compiled by S&P Global Market Intelligence.

Fairly priced now, says prognosticator

That change in recommendation came from Wolfe Research's Nigel Coe, who, on Wednesday, retagged Vertiv as a peerperform (i.e., hold) from his previous outperform (buy). Coe's price target wasn't immediately available.

Image source: Getty Images.

According to reports, Coe now believes that the recent, significant run-up in the share price has left Vertiv fairly valued. Despite the analyst's clear bullishness on the company -- he noted Wolfe has recommended it continuously since December 2022 -- it has vastly outperformed peers in the electric equipment/multi-industry segments of the industrial sector.

The downgrade comes several days after Vertiv bulked up its business. It did so by closing its roughly $1 billion acquisition of cooling technology specialist Purge Rite Intermediate.

A niche player in a booming business

Whenever a stock skyrockets, it's worth revisiting its fundamentals and valuations to determine whether it has reached (or is approaching) a share price peak.

So Coe's reevaluation is understandable; however, the data center space is a white-hot area of interest now, particularly given the need for build-outs to accommodate the growing demands of artificial intelligence (AI) technology. Given that, an effective niche player in the segment, such as Vertiv, probably still has significant upside potential.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.