Goldman Sachs said strong demand for data centers could boost Forgent Power Solutions’ stock price. The bank initiated the power infrastructure company, which designs power distribution equipment used in data centers and energy-intensive industrial facilities, with a buy rating. The 12-month price target of $48 implies 40% upside from here. Forgent Power Solutions went public on the New York Stock Exchange last month. Since its first trading day on February 5th, the stock price has increased 27%. FPS 1M Mountain FPS 1M Chart Analyst Joe Ritchie believes Forgent is well-positioned in the attractive power distribution equipment industry. The total addressable market for the industry is currently around $35 billion, which he predicts will grow by around 17.5% by the end of the decade. “Forgent is one of the few companies (with most products manufactured in-house) that can offer an entire data center electrical powertrain, an important feature for customers who prioritize speed, reliability, and single-source accountability,” he wrote. “U.S. electricity demand is projected to increase significantly due to data centers and industrial electrification, requiring significant investment in both new generation and transmission and distribution (T&D) networks.” Ritchie added that reshoring of U.S. manufacturing will be another strong long-term demand driver for Forgent. The company is also nearing completion of a $205 million investment program to dramatically expand its manufacturing footprint, designed to support up to $5 billion in annual sales, providing ample opportunity for Forgent to gain market share. Ritchie also argued that Forgent’s custom, engineer-to-order business model has the potential to significantly expand profit margins as volumes grow. He expects all of these factors to support Forgent’s valuation over the next few years. “Relative to its peers, we believe FPS’s revenue and EBITDA growth will significantly outpace the group over the next few years due to accelerating revenue growth and margin expansion,” Ritchie wrote. “While recent manufacturing capacity additions have resulted in a negative FCF conversion ratio today, we believe investors should focus on 2027 when assessing the company’s true FCF profile and earnings power.” Goldman Sachs was named one of the top initial public offering underwriters last month.
