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Financial institution of America upgraded Johnson Controls to ‘Purchase’ for its publicity to AI knowledge facilities.
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Johnson Controls is a high supplier of thermal cooling gear and different knowledge middle options.
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The corporate is trying to find a brand new CEO, which is seen as a constructive catalyst by Financial institution of America.
Johnson Controls is the inventory to purchase for protected publicity to the AI increase, in accordance with a word 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 part from safety cameras to HVAC programs offs buyers publicity to “best-in-class knowledge middle property.”
“We discover that JCI is the second-largest supplier of thermal gear (~15% market share), with main market share in chillers. JCI additionally sells constructing automation programs, safety, and hearth safety gear 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 rivals have, together with Trane Applied sciences and Provider.
Certainly one of 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 provided to an information middle requires roughly 285 tons of cooling, just like the necessities for a 115,000 sq. foot business constructing,” Obin defined.
And that is the place Johnson Management’s water-cooled centrifugal chiller and laptop room air dealing with merchandise come into play.
As for a possible catalyst for Johnson Controls, other than 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 tip of the 12 months and think about this as a constructive catalyst. Mixed with activist investor involvement, we consider this probably indicators a brand new strategic course for the corporate,” Obin mentioned.
Lastly, Johnson Controls provides buyers an interesting margin of security relative to different AI shares which were high-fliers over the previous 12 months.
That is as a result of Johnson Controls inventory is buying and selling at a big valuation low cost relative to its closest rivals. 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 common of those HVAC friends would indicate a 57% greater 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.
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