GE Vernova is gaining momentum a month after launching as a standalone company, wielding assets that analysts say put the General Electric spinoff in prime position to benefit from the energy transition. GE Vernova stock has gained about 16% to $177.32 since the company’s April 2 debut on the New York Stock Exchange after General Electric broke up into three separate companies. Investors are showing growing interest due to Vernova’s assets across natural gas, wind and power grid infrastructure. GEV 1M mountain GE Vernova, 1 month “Through its robust portfolio of equipment and service offerings, we believe GE Vernova is in prime position to benefit from the ‘Energy Transition Trifecta,'” Morgan Stanley analysts Andrew Percoco and Asmita Baskar told clients in a research note this month. This trifecta is growing electricity demand, power grid reliability and the need slash carbon emissions. Electricity demand from data centers and artificial intelligence is expected to more than double to 8% of total U.S. consumption by 2030, according to a Goldman Sachs report from April. There is a growing consensus among analysts that natural gas will play a key role in supplying the growth in power demand. Gas is the “bread and butter” of GE Vernova’s business, said Maheep Mandloi, director of clean energy research at Mizuho Securities. GE Vernova has an installed base of more than 7,000 gas turbines worldwide, with 70% of the gas power business focused on servicing those turbines, CEO Scott Strazik told investors in March. There is an expectation that increased utilization of gas assets due to rising power demand will benefit GE Vernova’s services business, Mandloi said. “The services business is interesting because as the utilization rate increases in the grid, the biddings on services also increases,” Mandloi said. “You have more wear and tear, you probably have faster replacements,” he said. Revenues in GE Vernova’s power business grew 6% year over year to $4 billion in the first quarter of 2024, driven by gas services due to more outages and higher pricing. Orders for the company’s gas turbines surged 25% to $5 billion. GE Vernova has a strong grid electrification business, selling transformers, switch gears and other equipment, Mandloi said. The company is also among the top five wind turbine manufacturers globally. “These three businesses benefit from load growth in general,” the analyst said. Mizuho has a buy rating on GE Vernova due to its strength in gas equipment services, disciplined growth in wind and the potential to expand margins in electrification. Morgan Stanley is equal weight, arguing the company’s valuation balances its momentum appropriately against downside risks in offshore wind. “We recommend investors stay nimble and take advantage of any short-term pullback in the shares,” Percoco and Baskar told clients. GE Vernova has reaffirmed its 2024 guidance of $34 billion to $35 billion in revenue. The power business is projected to have mid-single digit revenue growth. Wind segment revenues are forecast to be flat but approach profitability, and the electrification segment is expected to see low double-digit revenue growth.
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