GE Vernova stock price surged to a record high after the company published strong financial results and forward guidance. The stock jumped by 15% to a high of $630, up by 150% from the lowest point this year, bringing its market capitalization to over $171 billion.
GEV stock has been one of the best-performing spin-offs as it jumped by over 450% since the split from GE Aerospace.
GE Vernova strong earnings
GE Vernova, a company that manufactures various power products, published strong financial results, as we predicted here. It also issued a bullish forward guidance, citing the ongoing strong demand for power in the United States and other countries.
The company’s orders increased by 4% to exceed $12.4 billion, while its equipment backlog rose by over $5.2 billion to $50 billion. These numbers indicated that the company’s revenue increased by 11% to $9 billion, surpassing the consensus estimate of $8.8 billion.
The company’s net income and adjusted EBITA grew modestly to over $0.5 billion and $0.8 billion, respectively.
Its most important segments are thriving, with the win business being the only blemish. Its power EBITDA jumped to $770 million as its heavy-duty gas turbines increased to 20.
Additionally, the electrification business experienced strong growth, with its EBITDA jumping from $129 million in the second quarter of last year to $322 million this year. Its revenue jumped by 20% because of the ongoing grid solutions. It expects that the division’s revenue growth will be about 20% this year.
The wind division continued to deteriorate during the quarter. While wind’s revenue jumped by 9% YoY, the EBITDA deteriorated to a loss of over $165 million. Its management said:
“We are at the beginning of an investment supercycle into more reliable baseload power, grid infrastructure and decarbonization
solutions. Our near-term results are improving, but more importantly, our long-term potential is accelerating faster.”
GE Vernova then boosted its forward guidance. It expects that its revenue for the year will be between $36 billion and $37 billion, while the adjusted EBITDA margin and free cash flow will be between $3 billion and $3.5 billion. Analysts expect that its revenue for the year will be $37 billion, followed by $40 billion next year.
Valuation concerns remain
The main concern about GE Vernova is that its stock has become highly overvalued. It has a forward PE ratio of 97, much higher than the 45 it had in the same time last year.
According to SeekingAlpha, the company’s forward EV-to-EBITDA is 44, much higher than the industrial segment average of 11.
These numbers are much higher than the S&P 500 Index average of 24. They are also higher than those of companies like NVIDIA and Microsoft, which are still growing and have higher margins.
Therefore, the company will have a valuation reset in the next few months as investors start booking profits.
GE Vernova stock price technical analysis
GEV stock chart | Source: TradingView
The daily chart indicates that the GEV stock price has experienced a strong surge this year and has now reached an all-time high of $630. The risk, however, is that all oscillators, like the Relative Strength Index (RSI) and the Stochastic Oscillator, have become highly overbought.
At the same time, the stock has diverged from the moving averages. The 50-day moving average is at $498, while the 100-day MA is at $445. Therefore, there is a risk that the stock will go through mean reversion, where it drops and retests these two averages.
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