Rothschild Redburn double upgrades GE Vernova on stronger gas turbine demand

Investing.com — Rothschild Redburn double upgraded GE Vernova to Buy from Sell given stronger demand and margins in power equipment and services as rapid data center expansion tied to artificial intelligence boosts the outlook for gas turbines. The brokerage raised its price target on the company to $1100 from $560.

Demand indicators for AI-related power generation and gas turbines have surged. Order margins for new gas turbines and related services are rising as well.

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GE Vernova’s 2028 EBITDA is expected to be about 47% above current consensus estimates and 52% higher than the company’s current floor guidance, according to analysts. The higher outlook is driven largely by improved profitability in the power segment. Analysts now expect the unit to deliver an EBITDA margin above 30% in 2028, compared with the company’s floor guidance of 22%.

Rothschild Redburn also increased its expectations for the size of the gas turbine market with global demand to exceed 100 gigawatts in both 2026 and 2027, compared with its previous estimates in the low-80 gigawatt range.

The stronger earnings outlook lowers the company’s longer-term valuation multiple, the analysts said. Based on the new forecasts, GE Vernova’s 2028 price-to-earnings ratio would fall to about 18 times.

Though the brokerage flags high risks. The current share prices are difficult to justify on a discounted cash flow basis without assuming sustained high margins over the long term.

The firm said much of the recent margin strength stems from elevated gas turbine demand, which could fade if AI adoption slows or if constraints such as permitting, labor or infrastructure limit data center expansion. But risk of further upgrades to company guidance and consensus estimates makes a negative stance harder to justify.

Rothschild Redburn maintained a Neutral rating on Siemens Energy and raised its price target to €180 from €117.