TD Cowen raises GE Vernova price target to $405 from $400

Published 27/01/2025, 21:46
TD Cowen raises GE Vernova price target to $405 from $400

On Monday, TD Cowen maintained a positive stance on GE Vernova (NYSE:GEV), a $116 billion market cap electrical equipment giant, by increasing the company's price target to $405 from the previous $400, while keeping a Buy rating on the stock. The adjustment comes despite recent market turbulence affecting GEV and other power sector stocks, following the unveiling of a new AI model by DeepSeek. According to InvestingPro data, analyst targets for GEV currently range from $265 to $500, reflecting diverse market opinions about the company's prospects.

GE Vernova's latest earnings report had provided incrementally positive commentary. However, the subsequent release of DeepSeek's AI model, which is touted as being significantly cheaper and more efficient, sparked concerns about the future demand for electricity driven by AI technologies. This revelation led to a sharp decline of over 20% in GEV's stock value, as well as similar downturns across the power industry.

Despite the initial shock, historical trends in computing and industry suggest that improvements in efficiency typically lead to increased consumption, a phenomenon known as Jevon's Paradox. TD Cowen's Semis analyst, Josh Buchalter, pointed out that this pattern has been consistent throughout the history of computing, where efficiency gains have not resulted in reduced demand. This perspective gains credibility considering GEV's strong financial performance, with InvestingPro showing a remarkable 220% return over the past year and maintaining a "GOOD" overall financial health rating.

Investors are now weighing the potential impact of enhanced efficiency on the valuation of power companies like GE Vernova. The looming question is whether the efficiency improvements introduced by DeepSeek's AI model will lead to a slowdown in electricity demand, which could cap the growth in valuation for companies in the sector.

Third-party validation of the DeepSeek AI model is expected to take place in the coming days. This assessment could provide further insights into the model's potential to disrupt the market and clarify the extent of its impact on the future of electricity consumption. As the industry awaits these findings, the notion of an efficiency-driven slowdown remains a topic of concern among investors, potentially influencing their valuation decisions. For deeper insights into GEV's valuation and future prospects, InvestingPro subscribers can access comprehensive analysis, including 13 additional ProTips and detailed financial metrics that help paint a complete picture of the company's position in this evolving market landscape.

In other recent news, the energy sector experienced significant drops in stock prices due to concerns about DeepSeek's AI efficiency impacting demand for high-tech chips. Companies like Oklo, GE Vernova, Vertiv, Eaton (NYSE:ETN) Corporation, Amphenol (NYSE:APH), NuScale Power Corporation, and Constellation Energy (NASDAQ:CEG) Group saw declines ranging from 8% to 18%. Analysts, including Bloomberg Intelligence's Mustafa Okur, suggest these declines reflect fears of lower demand following DeepSeek's breakthrough in AI efficiency.

Despite this, some industry experts see potential long-term benefits, including cheaper AI implementation and expanded use of AI-related products and applications. However, immediate effects have led to a recalibration of expectations for companies involved in the AI supply chain.

Meanwhile, GE Vernova has been the subject of several analyst upgrades. Truist Securities raised the price target from $420.00 to $470.00, maintaining a Buy rating. BMO Capital Markets also increased the price target to $471.00, keeping an Outperform rating. Barclays (LON:BARC) increased the price target from $420.00 to $487.00, maintaining an Overweight rating. These adjustments reflect analysts' confidence in GE Vernova's long-term prospects, particularly in the gas turbine and electrification sectors.

GE Vernova's fourth-quarter earnings aligned with expectations, and the company has reaffirmed its fiscal year 2025 guidance. GE Vernova also plans to complete large offshore wind projects by 2026 and has revised its 2028 adjusted EBITDA margin target to 14%, up from the previous 10%. The company anticipates generating approximately $14 billion in cumulative free cash flow from 2025 to 2028.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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