Concerns about the reliance on artificial intelligence (AI) for future growth have emerged for GE Vernova Inc. (NYSE:GEV) as financial analysts reassess the company’s stock outlook. On January 12, 2024, Citi adjusted its price target for GE Vernova from $658 to $708, while maintaining a Neutral rating, which indicates a potential 10% upside. This revision comes amidst a broader review of the industrial sector as part of Citi’s fourth-quarter outlook.
Prior to Citi’s adjustment, analyst Ben Kallo from Robert W. Baird downgraded GE Vernova’s stock from Outperform to Neutral, lowering the price target significantly from $816 to $649. The stock had experienced a rally over the past year, but analysts express concern regarding an oversupply of power capacity, which Kallo noted has contributed to “shifting sentiment” around the company.
Some market observers argue that GE Vernova’s demand, particularly for its turbines and other equipment, has been heavily influenced by AI-driven growth. There is a prevailing concern that if technology companies do not successfully capitalize on AI’s potential, GE Vernova may face challenges in sustaining its current performance.
In response to these concerns, CEO Scott Strazik addressed the issue during the recent Investor Day event, stating, “AI is a real driver for us right now, but it isn’t the only driver.” This assertion reflects the company’s belief that its prospects extend beyond the current AI trends.
Positive Outlook and Analyst Support
Despite the concerns regarding AI, GE Vernova presented a robust outlook in early December 2023. The company projected that its total order backlog would grow to approximately $200 billion by the end of 2028, up from $135 billion, according to a report from Bloomberg. Additionally, GE Vernova indicated expectations for improved profit margins in its power and electrification segments, along with increased dividends and share buybacks.
Following this positive update, several analysts reaffirmed their confidence in the stock. Notably, JPMorgan raised its price target for GE Vernova from $740 to $1,000 while maintaining a Buy rating, suggesting a strong belief in the company’s long-term potential.
Company Profile and Investment Considerations
GE Vernova Inc. is a purpose-built global energy company that plays a significant role in the electric power industry, offering a range of products and services for generating, transmitting, converting, and storing electricity. The company operates in three primary segments: power, wind, and electrification.
While acknowledging the risks associated with investing in GE Vernova, some analysts argue that other AI-focused stocks might present higher potential returns in a shorter time frame. As the market navigates the complexities of AI integration and demand for energy products, GE Vernova’s future will depend on its ability to diversify its growth drivers and adapt to changing market conditions.
Investors are advised to stay informed about developments within the energy sector, particularly those relating to technological advancements and their implications for demand.
