GE Vernova: Raising Fair Value Estimate on Impressive Long-Term Guidance Update

Key Morningstar Metrics for GE Vernova

• Fair Value Estimate: $540.00
• Morningstar Rating: ★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: High

GE Vernova GEV provided an updated financial outlook at its Dec. 9 investor update. The firm raised its top line and margin expectations, expecting revenue to grow low double digits each year through 2028 and EBITDA margin of at least 20% (14% prior). Shares rose 6% in after-hours trading.

Why it matters: Long-term targets were expected to be raised, but the magnitude surpassed our and the market’s expectations. While revenue guidance wasn’t too far above our estimate, EBITDA margins easily surpassed our 17% forecast, with potential for further upside.

• Gas power was the star of the show. Management indicated it expects gas orders to surpass 20 gigawatts for the fourth quarter, equivalent to its orders for all of 2024.
• The firm announced a modest capacity expansion for gas turbines to 24 gigawatts per year in 2028, up from its prior 20-gigawatt guidance. This follows capacity expansions across the broader industry, including a recent expansion by peer Siemens Energy.

The bottom line: We are raising our fair value estimate for narrow-moat GE Vernova to $540 per share from $420, incorporating guidance and commentary into our model. The higher valuation is driven by increased expectations for its power and electrification businesses, partially offset by weakness in wind.

• GE Vernova remains well-positioned to benefit from the power demand for artificial intelligence, given its gas power and electrification businesses. We leave the event with increased confidence in the duration of its improved margin performance into the next decade, but still view market expectations as elevated.