GE Vernova declines after analyst downgrade of top AI energy trade
Power turbine maker GE Vernova is down midday after RBC analysts cut their rating on the stock from “outperform” (essentially a “buy”) to “sector perform” (essentially a “hold”), suggesting that long-term earnings expectations for the company might have gotten too optimistic.
RBC’s Christopher Dendrinos wrote:
“Our longer-term expectations are more conservative than consensus expectations which we think could be over appreciating the cadence of revenue growth in the power segment in 2029-2030. We believe investors are already fully valuing the company on the longer-term 2030 outlook and there could be more limited opportunity for positive rate of change in current expectations.”
Dendrinos argues that the Street’s expectations for when the river of payments will materialize from the service contracts GE sells to maintain the newly installed turbines is too soon. He wrote that it will take a much longer cycle:
“Mgmt sees an opportunity to double the installed base of baseload power over the next 10 years which should support significant rev growth and stronger margins (we estimate gas service margins over 30%).
However, the first major service cycle typically occurs ~3-4 years after installation so the benefit of service price increases and new LTSAs are unlikely to begin to benefit the income statement until later in the decade and will be a gradual increase.”
Earlier in the year, GE Vernova was a top performer as the AI data center trade boomed. It was up roughly 100% for the year in late July, making it the third-best gainer in the S&P 500 for the year.
It has stalled since then, though it remains up more than 80% in 2025.
