Morgan Stanley said in a research note published on November 12 that Siemens Energy's fourth-quarter results and updated medium- to long-term guidance have sent a positive signal for the long-term growth outlook of U.S. power equipment giant GE Vernova (GEV.US).
The bank believes that continued improvement in gas turbine profitability, strong demand for grid equipment, and the long-term growth potential of the aftermarket services business will drive GE Vernova's results to further exceed market expectations over the coming years. Morgan Stanley maintained its "Overweight" rating on GE Vernova and a $1,350 price target. Compared with the stock's closing price of $808.24 on November 11, that target implies roughly 67% upside potential.
Morgan Stanley analyst David Arcaro noted that, with Siemens Energy releasing its latest medium-term guidance, investors' focus on large power equipment manufacturers such as GE Vernova is shifting toward 2030 performance targets. Siemens Energy's newly published revenue growth and margin targets were broadly in line with investor expectations and further strengthened the bank's confidence in GE Vernova's long-term earnings prospects.
Siemens Energy now projects that its group margin will reach 20% to 22% by 2030, which at the midpoint of the range is 6 percentage points higher than its previous 2028 margin target. Morgan Stanley expects GE Vernova to achieve a similar magnitude of profitability improvement over the same period, with its EBITDA margin rising from 22.9% in 2028 to 27.9% in 2030, an increase of 5 percentage points.
Notably, Siemens Energy emphasized that achieving its latest performance targets does not require further product price increases. This means that if pricing on new orders remains strong, the company's actual earnings performance could still exceed its targets. Morgan Stanley believes this trend also applies to GE Vernova. The company's previously announced 2028 targets may have been conservative, and as high-margin orders are progressively converted into revenue, cost advantages from greater business scale gradually emerge, and production efficiency continues to improve, both its power and electrification businesses are expected to achieve higher margins.
Specifically, Morgan Stanley expects GE Vernova's power business to reach a 23.1% margin in 2027, surpassing the company's 2028 target of 22% a year early, while the electrification business is expected to reach a 21.5% margin in 2027, approaching its 2028 target of 22%.
Continued improvement in the profitability of gas turbine orders is another important reason Morgan Stanley is bullish on GE Vernova. Siemens Energy disclosed that the margin on new gas turbine equipment backlog orders for its 2026 fiscal year increased by about 14 percentage points, and orders for capacity already booked carry even higher margins. Company management also expects selling prices for new equipment in fiscal 2027 to be further above fiscal 2026 levels. By comparison, GE Vernova previously disclosed that the margin on its related backlog orders improved by 11 percentage points in 2025 and expected the improvement in 2026 to significantly exceed that level.
Morgan Stanley believes Siemens Energy's latest data provide a positive reference for assessing GE Vernova's fourth-quarter results due in January next year. In addition, because GE Vernova has more high-priced orders in the U.S. market, the bank remains optimistic about its future profitability. However, the actual magnitude of margin improvement will still depend on prior profitability levels and order mix.
Morgan Stanley's current 2030 forecasts for GE Vernova are already significantly above the Wall Street consensus. The bank expects the company's 2030 revenue to reach $85.7 billion, about 8% above the consensus estimate of $79.3 billion, and EBITDA to reach $23.9 billion, about 17% above the market estimate of $20.4 billion. At the same time, it expects GE Vernova's EBITDA margin at that point to reach 27.9%, above the market expectation of 25.8%. The power and electrification businesses will be the main drivers of the earnings beat, with Morgan Stanley's 2030 EBITDA forecasts for those two businesses about 15% and 16% above consensus, respectively.
Beyond equipment sales, the gas turbine aftermarket services business is also expected to become an important growth driver for GE Vernova after 2030. Siemens Energy expects its gas turbine services revenue to more than double from current levels by 2035, with average annual growth of about 8%. The margin on its newly signed service contracts is about 5 percentage points higher than that of its existing backlog. As more large gas turbines enter operation, related long-term service agreements will further enhance business profitability. GE Vernova has also previously said it sees a revenue growth opportunity of about $10 billion in its gas turbine services business by 2035.
Morgan Stanley believes the current large-scale deliveries of gas turbine equipment will create new growth space for the aftermarket services business in the future. This means that even if gas turbine equipment orders gradually return to normal levels in the mid-2030s, GE Vernova can still achieve earnings growth through an expanding equipment maintenance, repair, and long-term service business.
On the other hand, regarding recent market concerns triggered by SoftBank's write-down of power equipment assets, Morgan Stanley believes investors need not worry excessively about the impact on GE Vernova from an individual customer canceling orders. SoftBank previously announced the related asset write-down, sparking speculation that it might cancel capacity reservations and orders for GE Vernova gas turbines. Some investors estimate the capacity involved could be about 4 gigawatts. However, the relevant details remain unclear, and the specific reason and scale of any cancellation of capacity reservations have not been confirmed.
Morgan Stanley noted that GE Vernova's contract protection clauses typically allow it to retain advance payments equal to 20% or more of the total equipment price if a customer cancels an order. With gas turbine demand remaining strong, the company is also expected to resell the freed-up capacity to other customers at higher prices. Siemens Energy estimates that annual global gas turbine market demand will remain at 130 to 150 gigawatts through 2035. Morgan Stanley believes this further reinforces its confidence in GE Vernova's capacity sales outlook, and that even if an individual customer delays or cancels orders, the company can still sell its capacity at full utilization.
Looking at longer-term performance, Morgan Stanley expects GE Vernova's revenue compound annual growth rate through 2035 to reach 9.6%, with the power business and electrification business growing at average annual rates of 12% and 9%, respectively. The company's adjusted EBITDA margin is expected to rise from 14% in 2026 to 26% in 2035, while free cash flow is expected to increase from about $12.5 billion in 2026 to about $17 billion in 2030. However, the bank also noted that delays in offshore wind project deliveries and slower-than-expected adoption of related software products by grid operators remain key downside risks for GE Vernova.
Looking ahead, Morgan Stanley believes Siemens Energy's latest guidance, gas turbine order pricing, and aftermarket services prospects all provide a positive reference for GE Vernova's long-term growth. The market will next focus on GE Vernova's fourth-quarter results due in January next year, as well as an investor day expected before the summer of 2027, when the company is expected to announce new 2030 performance targets.
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