By Laura Sanicola

Forgent Power Solutions shares climbed nearly 6% Monday after four Wall Street firms initiated coverage with bullish ratings, extending gains since the company's February debut. The stock is up more than 30% from its $27 initial public offering price, trading around $35.

The initiations from JPMorgan, Bank of America, KeyBanc Capital Markets, and Jefferies frame Forgent as a play on one of the tightest bottlenecks in the AI buildout: electrical distribution equipment.

Formed as a private-equity roll-up by Neos Partners, the Dayton, Minnesota-based company manufactures transformers, medium-voltage switchgear, transfer switches, panelboards, and other equipment to move electricity from substations into data centers and utilities.

It generates roughly 42% of revenue from data centers and about 23% from grid infrastructure, but JPMorgan expects data centers could account for more than 60% of revenue by the end of the decade.

"We have never seen a demand cycle like what we are experiencing now in the AI/datacenter infrastructure space," wrote JPMorgan analyst Stephen Tusa, calling the current environment the "most ferocious we have ever seen."

Bank of America set a Street-high $48 price target, implying roughly 35% upside from recent levels. Jefferies initiated at $44, KeyBanc at $41, and J.P. Morgan at $40. Its average price target is about $42.75, a 20% upside to current levels.

Forgent's biggest advantage may simply be that it built manufacturing capacity ahead of demand.

The company recently completed a roughly $205 million expansion across North America, bringing its total footprint to nearly 2.3 million square feet. According to JPMorgan, those facilities are operating at roughly 30% of potential capacity, leaving room to grow without significant new capital spending.

Thanks to its vertically integrated structure, Forgent can deliver substation transformers in roughly 30 weeks, compared with industry averages of 80 weeks or more, J.P. Morgan estimates.

Jefferies analyst Julien Dumoulin-Smith argues the existing footprint can support revenue growth of roughly 40% annually through 2030 if demand holds and factories fill as expected. Faster delivery times and the ability to build customized equipment may also support stronger pricing than more standardized competitors.

JP Morgan estimates Forgent's manufacturing base could ultimately support as much as $5 billion in annual revenue, compared with roughly $1.3 billion analysts expect this fiscal year.

Much of the margin-expansion story depends on improving utilization. Because a large share of Forgent's costs are fixed, profits could rise meaningfully if volumes increase. JPMorgan sees potential for five to 10 percentage points of margin expansion over time.

Beyond speed, analysts emphasized Forgent's focus on engineered-to-order products, which make up roughly three-quarters of revenue. Rather than competing purely on standardized catalog components, Forgent works with customers early in the design process to build integrated power "powertrains" tailored to complex data-center or grid applications.

Taken together, Forgent's own market could grow meaningfully faster than the overall electrical equipment market, which is expected to rise by 20% annually, KeyBanc analysts said.

All of this should boost earnings per share by 50% to 60% annually over the next two years, according to FactSet estimates.

Forgent's boom comes as other parts of the energy-equipment landscape are suffering. Utility-scale solar equipment makers such as Shoals Technologies and Array Technologies have faced margin pressure from tariffs, rising steel costs, and project delays. Solar trackers and balance-of-system components are typically bid competitively on a project-by-project basis, making pricing more sensitive to developer economics.

But Forgent's electrical equipment sits further upstream in the power chain. With grid equipment still constrained and data-center load forecasts climbing, that segment has so far avoided the pricing squeeze hitting some renewable-adjacent names.

There are still risks to the stock. Bank of America cautioned that near-term margin pressure could emerge as new factories ramp and operating expenses rise. The firm also warned that industrywide capacity additions could pressure pricing in outer years if demand slows. The industry is also scrambling for labor: transformer manufacturing is skilled and labor intensive, with apprenticeship programs that can take nine to 12 months. The company will be competing with established players in the data center services business, like Eaton, ABB and Vertiv.

The valuation still looks high on near-term metrics at more than 50 times current-year earnings estimates, but compresses quickly on forward numbers. On 2027 estimates, shares trade in the mid-20s on an EV/Ebitda basis, compressing into the high teens by 2028.

It's a "rich valuation, but get what you pay for," Tusa writes.

Write to Laura Sanicola at laura.sanicola@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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March 02, 2026 14:46 ET (19:46 GMT)

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