GE Vernova is a "top pick" for 2025 based on expectations that it will take advantage of the forecast jump in energy demand as technology companies pour resources into artificial intelligence and the data centers needed to train the programs.
William Blair analyst Jed Dorsheimer proclaimed early Thursday that GE Vernova was a "top pick" for 2025, with natural gas set to play an important role as energy demand ramps higher.
"Electricity demand forecasts are increasing at a rate not seen since the 1970s, driven by an existential race in Big Tech by AI companies, in addition to re-shoring, factory automation, and migration shifts," Dorsheimer wrote Thursday. "We believe 2025 will accelerate the trend to energy pragmatism and resilience, centered on the abundance of natural gas and a revived appetite for nuclear energy."
The analyst believes natural gas will be the "workhorse for near- and medium-term electricity load growth for the AI data-center build out" in 2025. Dorshheimer added that GE Vernova, which produces the turbines to drive natural gas-fired generators, is the "largest beneficiary of shift back to natural gas."
The firm also sees further upside to GEV, despite its 200% run since its spinout from General Electric.
Meanwhile, GE Vernova Chief Executive Scott Strazik told Bloomberg on Wednesday that Big Tech companies are reserving gas turbines, for 5-gigawatt data center campuses. In the last 30 days alone, GE Vernova has signed 9 gigawatts of reservations for gas turbines from customers including data center developers, Strazik told Bloomberg.
U.S. supermajor Exxon Mobil also said on Wednesday it is planning a "massive" 1,500 megawatt natural-gas fired power plant dedicated to producing power for data centers.
Investor Day Bump
The "top pick" status for GEV comes after the Dec. 10 investor day event where the company announced a $1 annual dividend and a $6 billion share buyback program as part of its strategy to return at least a third of free cash flow to shareholders.
The company also revised 2025 revenue guidance, expecting $36 billion to $37 billion, narrowed from its previous $35 billion to $37 billion range. GEV also forecasts high-single digit revenue growth in 2028, up from its previous mid-single digit growth projections.
Free cash projections for 2025 are now $2 billion to $2.5 billion compared to GE Vernova's earlier $1.2 billion to $1.8 billion view.
Meanwhile, GE Vernova is also making progress on the nuclear energy front. The company announced Thursday its nuclear business, GE Hitachi Nuclear Energy, has been approved for an early step in the process of its development of small modular reactors, or SMRs, in the U.K.
No operating SMRs currently exist, but there are a number of companies developing the technology.
Market Backs Off Highs; Two AI Chip Plays Flash Buy Signals
Stock Performance: GE Vernova
GE Vernova sank 4.1% to 329.70 during market trade on Thursday after jumping 5% to 343.80 on Wednesday. Investors could view 354.69 as an early entry for GEV stock or use the all-time high, which it hit on Nov. 21, of 357.09 as a buy point, according to MarketSurge chart analysis.
The stock broke out of a seven-week base in mid-August. Shares are up more than 80% from that breakout.
Meanwhile, the 56 stocks in the IBD tracked Energy-Alternative/Other industry group have collectively gained more than 43% in 2024, according to MarketSurge.
In October, GEV reported worse-than-expected third-quarter profit as it continued to see "incremental contract losses" from its offshore wind business.
GE Vernova emerged from General Electric's big, long-term breakup earlier this year, with spinouts of GE Aerospace and GE HealthCare Technologies. GE Aerospace kept the GE ticker symbol.
Before the spinouts, the former General Electric shed a number of assets and operations over a series of years, from lighting to locomotives. In November 2017, GE began signaling the breakup process amid financial troubles.
GE Vernova stock has an 87 Composite Rating out of a best-possible 99. The stock also has a 97 Relative Strength Rating and a 61 EPS Rating.
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