On Tuesday, Goldman Sachs initiated coverage of GE Vernova (GEV), a company specializing in electric power generation and services, with a Buy rating and a price target of $154. GE Vernova, which operates in the gas, wind, nuclear, hydro, and solar sectors, is poised to play a significant role in the global shift towards electrification and decarbonization.
The firm's optimistic outlook for GE Vernova is based on the company's strong market position, with assets serving a market worth over $250 billion and a current backlog exceeding $100 billion. The International Energy Agency forecasts a 55% increase in electricity generation demand by 2040, necessitating a doubling of generation capacity, especially as renewables are expected to drive the majority of this growth.
Goldman Sachs commends the progress made by GE Vernova's management team over the past two years in restructuring the company to increase profitability. The firm anticipates considerable untapped earning potential in the coming years, particularly from the expansion of the wind power sector and enhanced profitability in the electrification business.
The investment firm projects that GE Vernova could achieve approximately $4 billion in EBITDA and $2.3 billion in free cash flow by 2026. Goldman Sachs believes that the company is uniquely positioned to capitalize on the ongoing energy transition and expects the stock's multiple to improve as the company's fundamentals strengthen. The $154 price target is based on approximately 10 times the firm's estimated 2026 EBITDA for GE Vernova.