HSBC has reaffirmed its Buy rating on GE Vernova (NYSE: GEV) and increased the stock's price target to $240 from $215.
The adjustment comes after the firm updated its forecasts to align with revised guidance and the CEO's recent statements. The new forecasts include a reduction in the 2024 and 2025 adjusted EBITDA estimates by approximately 13% and 5%, respectively, mainly due to lower wind earnings.
However, for 2026, the adjusted EBITDA estimate was increased by about 5%. This adjustment reflects expected higher electrification margins and increased delivery estimates in power due to expanded capacity.
Additionally, HSBC has reduced the weighted average cost of capital (WACC) for GE Vernova by 30 basis points to 6.8%. The firm believes the cut is justified by the strong growth visibility in GE Vernova's end markets. This reduction in WACC contributes to the lifted price target.
Looking ahead, HSBC points to the upcoming Investor Day on December 10 as a potential catalyst for GE Vernova's shares. During this event, GE Vernova is anticipated to raise its mid-term growth and profitability targets, which could further influence the stock's performance.
In other recent news, GE Vernova has been the focus of several major developments. The company confirmed its full-year 2024 financial guidance, projecting revenues to reach the higher end of the $34-$35 billion range.
Despite a projected $300 million EBITDA loss in the third quarter within its Wind business, GE Vernova is expanding its heavy-duty gas turbine production capacity by roughly 30-45% by 2026.
Furthermore, GE Vernova recently updated its executive compensation policy, establishing a new Executive Change in Control Severance Benefits Policy. This policy affects U.S. executive officers and certain employees, replacing the previous severance plan under certain conditions.
The company's performance has caught the attention of several analyst firms. BMO Capital initiated coverage on GE Vernova with an Outperform rating, while Jefferies and Goldman Sachs have reiterated their Buy ratings.
Morgan Stanley upgraded GE Vernova from Equalweight to Overweight, and William Blair assigned an Outperform rating to the company. Mizuho Securities also adjusted its outlook on GE Vernova shares, increasing its price target to $241 from the previous $208.
InvestingPro Insights
As GE Vernova (NYSE:GEV) captures attention with its updated price target from HSBC, real-time data and insights from InvestingPro offer additional context for investors. With a market capitalization of $61.99 billion and a P/E ratio standing at 46.36, GEV is a significant player in the Electrical Equipment industry. The company's financial health is underscored by the fact that it holds more cash than debt on its balance sheet, according to one of the InvestingPro Tips. This is crucial for investors considering the company's ability to navigate economic fluctuations and invest in growth opportunities.
GE Vernova's stock has seen a notable return over the last year, with a price total return of 71.88%, reflecting strong investor confidence. This aligns with HSBC's optimistic outlook for the company's end markets and the potential upside for the stock. Moreover, the InvestingPro Tips highlight that GEV's net income is expected to grow this year, reinforcing the potential for continued financial performance improvement. For those interested in further insights, InvestingPro offers a total of 19 additional tips for GE Vernova, which could help investors make more informed decisions.
Lastly, the company's next earnings date is set for October 23, 2024, which could provide further clarity on its financial trajectory and operational performance. With GE Vernova trading near its 52-week high, investors may want to keep an eye on the company's progress as it approaches its Investor Day and beyond.
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