-
Financial institution of America upgraded Johnson Controls to ‘Purchase’ for its publicity to AI knowledge facilities.
-
Johnson Controls is a high supplier of thermal cooling tools and different knowledge middle options.
-
The corporate is looking for a brand new CEO, which is seen as a constructive catalyst by Financial institution of America.
Johnson Controls is the inventory to purchase for secure publicity to the AI increase, in accordance with a observe this week from Financial institution of America.
The financial institution upgraded shares of Johnson Controls to “Purchase” from “Impartial” and elevated its value goal to $80 from $76, representing potential upside of about 15% from the place the inventory was buying and selling on Thursday.
The financial institution mentioned the commercial firm that sells every thing from safety cameras to HVAC programs offs buyers publicity to “best-in-class knowledge middle belongings.”
“We discover that JCI is the second-largest supplier of thermal tools (~15% market share), with main market share in chillers. JCI additionally sells constructing automation programs, safety, and fireplace safety tools into knowledge facilities,” Financial institution of America analyst Andrew Obin mentioned.
Johnson Controls will generate about $4 billion in income from knowledge facilities this 12 months, representing about 14% of its enterprise. That’s greater than triple the info middle publicity its closest opponents have, together with Trane Applied sciences and Provider.
One in all Johnson Controls’ best-selling merchandise to datacenters is liquid-cooling programs, which assist distribute and offset the immense warmth generated by AI-focused servers.
“One megawatt of energy equipped to a knowledge middle requires roughly 285 tons of cooling, much like the necessities for a 115,000 sq. foot industrial constructing,” Obin defined.
And that is the place Johnson Management’s water-cooled centrifugal chiller and pc room air dealing with merchandise come into play.
As for a possible catalyst for Johnson Controls, apart from its knowledge middle publicity, Financial institution of America highlighted its ongoing seek for a brand new CEO.
“We count on a brand new CEO announcement earlier than the top of the 12 months and examine this as a constructive catalyst. Mixed with activist investor involvement, we imagine this probably indicators a brand new strategic path for the corporate,” Obin mentioned.
Lastly, Johnson Controls affords buyers an interesting margin of security relative to different AI shares which have been high-fliers over the previous 12 months.
That is as a result of Johnson Controls inventory is buying and selling at a major valuation low cost relative to its closest opponents. Its ahead price-to-earnings ratio of 18x is even decrease than the broader S&P 500’s valuation of about 21x.
“JCI hypothetically re-rating absolutely in step with the typical of those HVAC friends would suggest a 57% increased valuation,” Obin mentioned.
Shares of Johnson Controls have been on a tear this 12 months as buyers get up to its AI knowledge middle publicity, with the top off up 22% year-to-date.
Learn the unique article on Enterprise Insider