GE Vernova Stock Is an AI Winner. The Case to Buy. -- Barrons.com

Al Root

GE Vernova stock can keep its impressive run going, according to one bullish analyst.

Wells Fargo's Michael Blum launched coverage of the power-generation technology company with a Buy rating and a $385 price target on Thursday. That's the second highest target price listed on FactSet and about 12% higher than where Vernova stock closed on Wednesday.

The "AI power surge to be met first and foremost by natural gas," wrote Blum.

AI data centers use a lot of electricity and natural gas-fired power turbines are a good way for the U.S. to add electricity-generating capacity. Vernova's most profitable business is its natural-gas turbine business.

"We project U.S. power demand to increase at about 3% [annually] from 2024 to 2032, driven by the AI data center buildout, reshoring, and electrification trends tied to the energy transition and decarbonization goals," added the analyst. "We estimate the largest source of demand will be gas (40%), followed by wind, solar, and nuclear."

More electricity also means grid investments. GE Vernova makes grid technologies, too.

GE Vernova shares were up 0.5% in premarket trading at $344.51 while S&P 500 futures were flat and Dow Jones Industrial Average futures were up 0.1%.

Coming into Thursday trading, Vernova stock was up about 145% since its Apr. 2 spinoff from GE Aerospace. Shares were also up about 9% since the Nov. 5 U.S. presidential election. Investors believe President-elect Donald Trump's energy policies will keep natural-gas prices low, making Vernova's gas turbines more attractive.

Gains have left Vernova shares trading at almost 50 times estimated 2025 earnings, according to FactSet.

That valuation multiple hasn't dissuaded the Street. Overall, 74% of analysts covering GE Vernova stock rate shares Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for GE Vernova shares is about $323, below where the shares are trading.

Sometimes it's hard for Wall Street to keep up when shares move like GE Vernova stock.

Write to Al Root at allen.root@dowjones.com

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November 21, 2024 07:53 ET (12:53 GMT)

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