BMO raises GE Vernova price target to $522 from $381

BMO Capital Markets raised its GE Vernova (GEV) price target to $522 from $381, maintaining an Outperform rating, citing increased gas power equipment pricing and service margin assumptions through 2030. The firm highlights GE Vernova's success in securing over 21 GWs in new slot reservation agreements, potentially adding over $60 billion to its existing $76 billion backlog, driven by increasing data center capacity and demand for gas generation. S&P Global Ratings also upgraded GE Vernova’s outlook to positive, anticipating adjusted EBITDA margins to reach 10% over the next 12-24 months.

Analysis

GE Vernova (GEV) has received a significant upward revision in its price target from BMO Capital Markets, moving from $381.00 to $522.00 with an Outperform rating maintained, reflecting confidence in continued growth despite a 49% share price outperformance against the S&P 500. This optimism is rooted in BMO's increased assumptions for gas power equipment pricing and service margins for 2028-2030, with current projections potentially remaining conservative. GE Vernova's strong financial standing is underscored by an InvestingPro overall health score of "GREAT" and current revenue of $35.71 billion. The company has secured over 21 GWs in new slot reservation agreements, potentially adding over $60 billion to its existing $76 billion equipment and service backlog. This demand is significantly driven by the expanding scale of data centers, with projects now averaging 50 MWs and later-stage global projects exceeding 200 MWs, which has contributed to a tripling of combined cycle gas turbine (CCGT) pricing since late 2023. BMO has also incorporated approximately $11 per share for GE Vernova’s small modular reactor (SMR) pipeline into its 2028 valuation base, an element not yet in earnings estimates, amid growing global support for nuclear expansion. Further bolstering this positive outlook, S&P Global Ratings upgraded GE Vernova’s outlook to positive, citing rapidly improving profitability and expectations for adjusted EBITDA margins to reach 10% within the next 12-24 months. While GE Vernova’s power business saw a 2.6% increase in its services backlog in 2024, its equipment backlog declined due to the sale of its steam original equipment business. Other analysts remain bullish, with Wells Fargo maintaining an Overweight rating ($474 target) due to strong gas turbine demand, and JPMorgan reaffirming its Overweight rating ($460 target), highlighting potential in the Electrification segment. Additionally, Prolec GE, a joint venture, announced a $140 million investment to double transformer output, supporting North American electrification.

Key Decisions for Investors

• Investors should consider the upgraded price targets from multiple analysts, reflecting strong underlying demand for gas power driven by data center growth and improving service margins.
• Monitor the conversion of GE Vernova's substantial slot reservations, exceeding 21 GWs, into firm backlog additions, which could significantly enhance future revenue visibility beyond the current $76 billion backlog.
• Factor in the long-term potential of the small modular reactor (SMR) pipeline, valued by BMO at approximately $11 per share, and track progress in GE Vernova's Electrification segment, which JPMorgan views as having upside potential beyond current guidance.
• Assess the company's ability to sustain its rapidly improving profitability, particularly the trajectory of adjusted EBITDA margins towards the projected 10% target within the next 12-24 months, as highlighted by S&P Global Ratings.