GE Vernova Outlook: Gas Power Growth Drives Revenue Expansion

GE Vernova's power segment revenue is expected to grow at a 14.0% CAGR through 2028, driven by capacity expansion and price increases. EBITDA margins are expected to expand to over 18.0% from 12.5% in 2024. The company's fair value estimate is increased to $420 per share from $390. GE Vernova is well-positioned to capitalize on growing electricity demand, but its valuation may be too high given the cyclicality of its business.

GE Vernova Inc. (NYSE: GEV), a purpose-built global energy company, has seen its power segment revenue grow significantly, driven by capacity expansion and price increases. According to Morningstar, the company's fair value estimate has been increased to $420 per share from $390, reflecting a positive outlook on the power and electrification segments.

The power segment, which includes gas power, is expected to grow at a compound annual growth rate (CAGR) of 14.0% through 2028, as EBITDA margins expand to over 18.0% from 12.5% in 2024. This growth is supported by a previously announced capacity expansion in the second half of 2026, which is expected to support 20 gigawatts of annual shipments. Additionally, healthy price increases are anticipated to drive revenue growth.

The company's ability to expand margins within its service business, particularly in the transactional segment, is also expected to contribute to overall margin expansion. This growth is driven by the increasing demand for electricity, with GE Vernova well-positioned to capitalize on this trend.

However, Morningstar analysts caution that the current valuation may be too high given the inherent cyclicality of the company's business. They note that the bulk of the valuation difference versus the market price is likely attributable to the implied multiple beyond 2029, where they expect the pace of margin expansion to slow.

The central question for GE Vernova remains the duration of the upcycle in the gas power and electrification businesses. While the company has shown strong performance in these segments, the analysts remain hesitant to ascribe the margin levels needed to justify the current valuation of shares.

Despite these concerns, GE Vernova's recent deal with Crusoe to deliver 29 units of its LM2500XPRESS aeroderivative gas turbine packages to AI data centers highlights the company's ability to provide flexible and efficient power solutions to meet growing energy needs [2].

In conclusion, while GE Vernova's power segment revenue is expected to grow significantly through 2028, investors should be mindful of the cyclical nature of the business and the potential for valuation to be too high given the current margin levels.

References:
[1] https://www.morningstar.com/stocks/ge-vernova-taking-closer-look-2028-power-segment-earnings-power
[2] https://www.gevernova.com/news/taxonomy/term/286