Three data center stocks worth knowing
In recent years, artificial intelligence (AI) has become one of the hottest market themes. Investors are constantly looking for ways to gain exposure to this dynamic sector. One of the most interesting approaches is to focus on stocks of companies that are key players in the data center space.
Data centres form the backbone of modern digital infrastructure and their importance is growing steadily in an era of AI expansion. In this article, we look at three stocks that may be of interest to investors.
Vertiv $VRT
Vertiv provides services for data centers, communications networks, and commercial and industrial facilities. It offers a broad portfolio of solutions and services focused on power, cooling and IT infrastructure. The significant increase in revenue and earnings outlook indicates that demand for Vertiv's products continues to grow.
Despite the stock's low annual yield of 0.1%, the company has been able to generate cash, giving it flexibility for future dividend increases. In the most recent quarter, it achieved adjusted free cash flow of $101 million, a 300% increase year-over-year. The outlook for this fiscal year is for earnings per share growth of 38% and revenue growth of 13%, confirming the company's strong growth profile.
Super Micro Computer $SMCI
Super Micro Computer is a leading provider of advanced server solutions for the 5G/Edge, data center, cloud, enterprise, big data, HPC and embedded markets. SMCI stock has a very positive outlook, which has earned it a Zacks Rank #1 (Strong Buy). The company expects 100% earnings per share growth and 11% revenue growth this fiscal year.
Although the stock trades at a high multiple of expected earnings, it reflects investors' high growth expectations. The company has posted triple-digit year-over-year revenue growth in several consecutive quarters. Although the stock has lost about 20% of its value in the past three months, which can be attributed to profit taking after previous impressive growth, the positive earnings outlook suggests the possibility of a resumption of the growth trend.
Eaton $ETN
Eaton is an intelligent energy management company that offers products for data centers, utilities, industrial, commercial facilities, engineering, residential markets, aerospace, and mobility. Shares of Eaton have a Zacks Rank #2 (Buy) with a positive earnings outlook. In the most recent quarter, the company posted record earnings per share of $2.40 and revenue of $5.9 billion.
For income-seeking investors, Eaton offers an annual yield of 1.2% and a five-year annualized dividend growth rate of 5.4%. The company recently increased its quarterly dividend payout by 9% and has paid dividends annually since 1923. Steady growth and a long-term dividend history make Eaton an attractive choice for investors seeking both growth and income.
Disclaimer: There is plenty of inspiration to be found on Bulios, but stock selection and portfolio construction is up to you, so always conduct a thorough analysis of your own.
Source: Yahoo Finance, CNBC and Zacks.
