By Ben Levisohn

Vertiv is set to report earnings before the market opens on Wednesday, and it has a lot of convincing to do.

Vertiv makes cooling systems for artificial-intelligence data centers, among other products. The stock had been on a tear until DeepSeek called the entire AI trade into question. Vertiv stock dropped 30% on Jan. 27 and is still down 16% from where it was trading on Jan. 24.

Still, Vertiv's shares have nearly doubled over the past 12 months -- for good reason. The company is expected to report a fourth-quarter profit of 82 cents a share, up 46% from the same quarter in 2023, on sales of $2.16 billion, up 16%.

The question now is what Vertiv says about demand for its products in the future. Vertiv may be worth its current 33.7 times earnings if its cooling products are expected to keep flying off the shelves. If it hints at reduced uptake, that would be a problem.

J.P. Morgan analyst Stephen Tusa expects the company to maintain its 2025 guidance. "The company tends to be conservative with its initial outlooks," he writes. He sees the possibility that management's guidance for the first quarter of the year, typically the weakest, could come in below expectations.

Tusa is also listening for what the company says about tariffs given that it makes some of its products in Mexico. The fact that the stock has clawed back about half of its post-DeepSeek losses also makes him "a bit cautious into the quarter," he writes. "Looking beyond the print, we remain positive and would continue to use near-term pullbacks as buying opportunities."

Investors seemed to be a bit cautious as well. Vertiv stock closed 2% lower at $123.25 on Tuesday, the day before the earnings announcement.

In August, when shares were trading around $80.21, Barron's wrote favorably about the stock. We reiterated our optimism on shares earlier this month, calling the DeepSeek selloff a buying opportunity.

Write to Ben Levisohn at ben.levisohn@barrons.com

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February 11, 2025 16:41 ET (21:41 GMT)

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