Goldman Sachs expects Nvidia ’beat and raise,’ lifts price target to $240
On Wednesday, GE Vernova (NYSE:GEV), a company recently spun off to stand alone, received a downgrade in its stock rating from Raymond James. The firm shifted its perspective of GE Vernova from Outperform to Market Perform, indicating a change in their expectation of the company's stock performance relative to the overall market.
The downgrade comes despite GE Vernova's impressive stock gain of 94% since becoming an independent entity, a performance that has made it one of the standout beneficiaries of the growing interest in AI and data center buildout.
The company, which is now part of the S&P 500, has been recognized for its strategic position in the electrification segment and its potential through the AirJoule joint venture with Montana Technologies, which is anticipated to be a key development to follow up to 2026 and beyond.
The analyst from Raymond James noted that while Vernova serves as a prime example of a company benefiting from the AI boom through its essential role in power demand, the current rally in its stock price may be excessive.
The analyst pointed out that Vernova's trading history is limited given its recent spin-off, yet its current earnings multiple is at the upper end when compared to other specialty industrial companies which also have connections to the electric power industry excitement.
GE Vernova's stock is currently trading at 46 times its projected 2025 adjusted earnings per share (EPS), a valuation that the analyst considers steep given the company's expected high-single-digit top-line growth and an EPS growth rate roughly double that. This results in an implied Price/Earnings to Growth (PEG) ratio of more than two times, suggesting that the stock may be overvalued at its current price.
In other recent news, GE Vernova has been the subject of various analyst notes and company developments.
Oppenheimer initiated coverage on the company with a Perform rating, acknowledging the firm's restructuring efforts and potential for growth.
Truist Securities initiated coverage with a Buy rating and set a $300 target, citing GE Vernova's significant role in the energy transition sector.
RBC Capital Markets increased its price target to $246, while BofA Securities upgraded the stock to a Buy rating and raised the target price to $300.
HSBC reaffirmed a Buy rating and increased the stock's price target to $240 due to the company's growth outlook.
GE Vernova confirmed its full-year 2024 financial guidance, projecting revenues to reach the higher end of the $34-$35 billion range, despite a projected $300 million EBITDA loss in the third quarter within its Wind business. The firm plans to expand its heavy-duty gas turbine production capacity by approximately 30-45% by 2026.
In other company news, GE Vernova recently updated its executive compensation policy, establishing a new Executive Change in Control Severance Benefits Policy, affecting U.S. executive officers and certain employees. These recent developments highlight the ongoing evolution of GE Vernova's operations and market position.
InvestingPro Insights
The recent downgrade of GE Vernova (NYSE:GEV) by Raymond James aligns with several key metrics and insights from InvestingPro. The company's current P/E ratio of 46.36, as reported by InvestingPro, supports the analyst's view that the stock is trading at a high earnings multiple. This is further emphasized by the adjusted P/E ratio of 98.99 for the last twelve months as of Q2 2024, indicating an even more pronounced valuation premium.
InvestingPro Tips highlight that GEV is "Trading at a high earnings multiple" and "Trading near 52-week high," which corroborates the Raymond James analyst's concern about the stock's current valuation. The stock's price is currently at 99.18% of its 52-week high, suggesting limited upside potential in the near term.
Despite these valuation concerns, InvestingPro data shows strong recent performance, with a 27.63% price return over the last month and an impressive 95.45% return over the past year. This aligns with the article's mention of GEV's 94% gain since becoming independent.
For investors seeking a more comprehensive analysis, InvestingPro offers 17 additional tips for GE Vernova, providing a deeper understanding of the company's financial health and market position.
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