While investors are focused on technology stocks reaping from the booming artificial intelligence (AI) sector, a market strategist has identified an outsider equity likely to benefit from the AI wave.
Specifically, GE Vernova (NYSE: GEV), an energy equipment manufacturer, is considered a possible non-tech equity likely to see traction thanks to the company’s potential to meet AI electricity demands, Roy Mattox, a chief market strategist, noted in an X post on September 24.
According to the strategist, as the global demand for AI and data centers continues to surge, so does the need for electricity. In his view, AI’s energy consumption could grow several times in the coming decade, driven by advanced AI technologies.
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GE Vernova, a leading energy and power infrastructure solutions provider, is uniquely positioned to capitalize on this demand.
“AI and power needs are real. We will need enormous increases in electricity to power AI and data centers. GEV is a leader,” the expert said.
Mattox sees GE Vernova’s recent stock price surge as just the beginning. While the stock has rallied significantly, gaining nearly 30% in the past three months alone, Mattox believes there’s more upside.
He pointed out that investors should watch for a possible pullback or consolidation before jumping in. Stocks like GE Vernova, Mattox says, often exhibit short-term pauses before breaking out further—a pattern reminiscent of Square’s rapid rise from $17 to $100 in 2017.
The expert added that long-term investors should pay close attention to GE Vernova’s earnings, projected growth, and industry tailwinds. The stock currently boasts strong EPS growth and an upward trend in relative strength compared to its peers.
For the quarter ending June 2024, the company recorded an EPS of 1.02, beating analysts’ estimate of 0.74. Although the energy firm’s revenue of $8.26 billion fell short of estimates by 0.67%, it remained in the green year-over-year, gaining 1.05%.
It’s worth noting that GE Vernova is adding to the list of non-traditional tech companies projected to become key players in the AI scene. To this end, Mark Newton, a technical analyst at Fundstrat Global Advisors, observed that electric vehicle manufacturer Tesla (NASDAQ: TSLA) would likely become a key AI player in the coming years, considering the company’s role in the upcoming Robotaxi, the humanoid robot and Full Self-Driving (FSD).
Analysts’ outlook on GEV
Meanwhile, analysts are offering a mixed outlook for GE Vernova for the coming months. Bank of America (NYSE: BAC) analyst Andrew Obin upgraded the stock to a buy, citing key internal fundamentals, with a price target of $300 over the next 12 months.
“We believe GEV shares can deliver beat and raise results in many coming quarters. We see the December 10th investor event as a positive catalyst. We expect management to raise its medium-term targets and potentially announce a buyback, given the build-up of excess cash. We argue US electrical growth is poised to accelerate and GE Vernova has greater US exposure relative to peers,” Obin said.
In a September 16 outlook, Mizuho Securities shared a bullish outlook for the stock, increasing its price target to $241 from the previous $208. The firm has sustained its Outperform rating for GEV share price.
According to the analysts, GE Vernova has high potential for growth in the coming months thanks to its stronger margins in its Gas and Electrification business segments during the second half of 2024.
While the analysts remain bullish, the energy company has grappled with several challenges, especially in its offshore wind operations. In particular, the firm’s plants in the United States and the United Kingdom have suffered blade failures, leading to unexpected remediation costs, which dilute gains from margin improvements.
On the other hand, a consensus of 12 Wall Street analysts at TipRanks anticipates a minor correction of about 3% in GE Vernova’s stock price over the next 12 months, projecting an average valuation of $245.10. Analysts who maintain a bearish view have set a low target of $178, while the high prediction is $300.
GEV stock price analysis
In the meantime, GEV’s share price has been on a bullish rally in 2024, with the stock rising 93% year-to-date. As of press time, the equity was trading at $254, gaining 1% in the past 24 hours.
In conclusion, GE Vernova is emerging as a compelling investment opportunity amidst the ongoing AI revolution. While the stock has experienced significant gains, investors need to remain vigilant for potential market fluctuations.
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