GE Vernova stock is firing on all cylinders: analysts see an 8% retreat

GE Vernova (GEV) stock price has gone vertical, soaring to a record high of $265. It has jumped by over 135% from its lowest point on record, bringing its market cap to over $72 billion, making it one of the top players in energy.

AI power demand rising

The main catalyst for the ongoing GE Vernova share price surge is the rising hope that global demand for energy will continue rising. 

One of the main reasons for this is the fact that artificial intelligence (AI) investments are surging, especially in the United States.

Just last week, OpenAI, the parent company of ChatGPT raised cash at a $157 billion valuation, making it the biggest player in the industry.

Large companies like Microsoft, Alphabet, and Amazon are also expected to spend over $200 billion in AI investments. 

The rise of AI demand means that these companies will need more power since AI data processing consumes substantial amounts of energy. 

A good example of the rising AI data demand is a recent deal between Microsoft and Constellation Energy. The deal will see the company restart the Three Mile Nuclear Plant. Last week, the company revealed that it would pursue a $1.6 billion loan guarantee to do that work.

Read more: Constellation Energy stock surged: brace for a pullback

Analysts believe that more such deals will be announced in the next few years. For example, Alphabet has inked a deal with NextEra Energy, the biggest utility company in the US. The deal will see it supply over 860 MW of energy to Google. 

Therefore, GE Vernova stock is surging because it has positioned itself as an AI energy supermarket because of the products it offers. 

The company manufactures engines that power the energy sector. It is a large onshore and offshore wind turbine provider. 

Also, GE Vernova is one of the biggest players in the hydro, nuclear, steam, and gas. Additionally, the company provides the software that companies need to produce and manage power. 

GEV emerged as an independent company after being spun off from General Electric. Before the spin off, it was one of the top laggards in the company because of the recent troubles in its wind energy division. 

GEV business is doing well

The most recent financial results showed that GE Vernova’s business was doing well as orders rose in the US and other countries. 

Its power division had orders worth $5 billion, a 30% increase from the same period last year. Its electrification backlog jumped by 35% to $4.8 billion.

However, the wind energy division continued to underperform, with orders falling by 44% to $2.2 billion. Many large wind energy projects have either been paused or stopped because of the elevated costs and low return. 

Last year, Orsted decided to end a large New Jersey wind project citing high inflation, interest rates, and supply chain bottlenecks. 

Its wind division orders fell by a big number because of a large order that the company received in the same quarter last year. However, that order was canceled. In a statement, the company’s CFO said:

“We remain cautious on the timing of an Onshore order inflection in North America as customers navigate growing interconnection queues and higher interest rates.”

GE Vernova’s revenue was $8.2 billion, a 2% increase from the $8.1 billion it made last year. However, the figure was much lower than the $10 billion it made in the fourth quarter. 

The company also boosted its forward guidance, with its adjusted EBITDA margin expected to be between 5% and 7%. Its annual revenue is expected to be between $34 and $35 billion, an increase from the $33.2 billion it made last year. 

Still, there are concerns about whether the GEV share price has more upside left. Some analysts believe that the company has more room to grow this year. 

However, the average stock target is $245, which is about 7.2% below its current price. It has also received downgrades from HSBC and Raymond James. HSBC slashed the outlook from buy to hold while Raymond slashed it from outperform to market perform. 

These analysts believe that GE Vernova is overvalued and that the case for AI power demand has been priced on.

GE Vernova stock price analysis

GEV chart by TradingView

The daily chart shows that the GEV share price has been in a strong bullish trend in the past few months. It has risen from $114.53 in March to $265. 

Also, the stock remains 24% above the 50-day Exponential Moving Average (EMA). The Percentage Price Oscillator (PPO) has remained above the neutral point. Also, the Relative Strength Index (RSI) has moved to the overbought level.

Therefore, while the stock has more upside, there is a probability that it will pull back as sellers target the 50-day moving average of $215.

The alternative scenario is where it continues rising as bulls wait for the next earnings on October 23rd.

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