GE Vernova stock price soared to a record high this week after a positive statement from Bank of America analysts who boosted their outlook. GEV soared to a high of $383, making it one of the best-performing spin-offs as the stock has soared by 235% from its lowest level in 2024, bringing its market cap to over $101 billion. So, can the overvalued company maintain its momentum?
Analysts are upbeat about GEV
GE Vernova is a large industrial company in the energy industry that emerged from General Electric. It became an independent company after GE decided to separate into three separately traded company.
Today, GE Aerospace has gained a market cap of $191 billion, while GE Healthcare is valued at almost $40 billion. That brings the total market cap of the three companies to $332 billion, much higher than when they were part of a conglomerate.
Analysts are upbeat about GE Vernova’s outlook, as energy demand continues to rise due to the artificial intelligence industry. In a note on Tuesday, analysts at Bank of America boosted the stock outlook from $386 to $415, citing the rising demand for gas turbines.
Other analysts are still bullish about the company, with those from JPMorgan, Wells Fargo, Jefferies, and Goldman Sachs having a bullish outlook.
This optimism is mostly because of the ambitious targets the company has set about its future. The company expects its annual revenue to grow to $48 billion in 2028 from about $35 billion in 2024 and $37 billion in 2025.
It also expects its operating margin to move from about 6% in 2024 to over 14% in 2028. As such, if it manages to hit its targets, it means that its EBITDA will be about $6.72 billion by then.
Read more: GE Vernova stock soared to a record high: brace for a pullback
Valuation concerns remain
The main concern among most analysts is that its valuation has become stretched this year. Its stock price of $382 is higher than the median estimate of Wall Street analysts at $368. That is a sign that it has moved above the consensus estimate.
GE Vernova’s current valuation metrics paint it as a fast-growing company. Using the estimated EBITDA figure of $6.7 billion, investors are giving it a 2028 price-to-EBITDA ratio of 15, which is highly extreme.
Data compiled by SeekingAlpha shows that GE Vernova’s forward P/E ratio is 55.80, and its trailing figure is 79. These figures are both higher than the sector median of 22 and 23, respectively. These are huge numbers because fast-growing and high-margin companies like Microsoft and NVIDIA have smaller metrics than them.
They are also highly extreme because of the cyclical nature of the energy industry, especially wind. This is notable because interest rates and inflation are expected to remain higher for longer, impacting power infrastructure.
GE Vernova stock price analysis
GEV stock chart | Source: TradingView
The daily chart reveals that the GEV share price surged from a low of 114.37p in March last year to $380 today. It moved above the crucial resistance point at $356, its highest level on November 21st. By moving above that level, the stock invalidated the double-top pattern that was forming.
The stock has remained above all moving averages, while the Relative Strength Index (RSI) has moved close to the overbought point at 70. Therefore, the GEV stock price will likely continue rising as bulls target the resistance level at $400. It will then drop sharply amid profit-taking, potentially after its January 22 earnings.
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