This AI play has an unshakeable moat, but has flown under the radar
Investors who want to benefit from the AI boom maybe overlooking this stock, which is poised to double its revenue in the next three to four years.
TL;DR
- Linde's revenue growth rate is projected to rise to at least 8% due to a record $11.1 billion project backlog, largely driven by AI-related semiconductor manufacturing.
- Approximately 30% of Linde's gas revenue is secured by 15- to 20-year 'take-or-pay' contracts for on-site facilities, shielding it from macro cyclicality and inflation.
- Operating margins are expanding towards 31% due to fixed infrastructure leverage, with projected annual adjusted EPS growth of 13% to 14%.
- Linde supplies ultra-high purity gases critical for advanced AI chip fabrication, positioning it as an essential infrastructure provider for the AI boom.
- The company benefits from three core secular catalysts: market share expansion in advanced electronics, clean energy and carbon capture opportunities, and margin expansion.
- Linde's long-term contracts provide predictable cash flows and insulation from economic volatility, with automatic energy cost pass-throughs for about 30% of its business.
- Despite accelerating growth and expanding margins, Linde trades at an enterprise value to EBITDA of about 17.6x, presenting an attractive entry point with an implied 25% upside to its fair value target.
- Linde operates within an industrial gas oligopoly, holding a significant global market share alongside Air Liquide and Air Products.