GE Vernova Surges 44% in 3 Months: Should You Buy the Stock Now?

GE Vernova Inc. GEV shares have surged an impressive 43.5% in the past three months, outperforming the Zacks Alternative-Energy industry’s rise of 13.6% and the S&P 500’s return of 8.8%. The broader Zacks Oils-Energy sector has declined 6.2% in contrast. As a renowned renewable energy equipment and services provider, GE Vernova continues to ride on increasing electricity demand worldwide, along with enhanced adoption of renewable energy across industries.Image Source: Zacks Investment ResearchA similar stellar performance was delivered by other industry players, such as Bloom Energy BE, Talen Energy Corporation TLN and Constellation Energy Corporation CEG, with their shares surging a solid 153.7%, 25% and 20%, respectively, in the last three months.With GE Vernova riding high, individuals may rush to add the stock to their portfolio. However, before making any hasty decision, it would be prudent to take a look at the reasons behind the surge, the stock’s growth prospects as well as risks (if any) to investing in the same. The idea is to help investors make a more insightful decision.What’s Been Driving GEV Stock Up?The global expansion of data centers and increasing electricity consumption have significantly driven the surge in worldwide electricity demand. This trend is particularly evident in emerging nations and developing economies, where robust economic activities and growing prosperity are fueling energy requirements. As these regions continue to develop, their rising demand for electricity contributes to the overall increase in global energy consumption, consequently boosting GE Vernova’s growth. Notably, 25% of the world’s electricity is generated using the company’s installed base of technologies.GE Vernova’s Power business segment reported an impressive 8% year-over-year revenue growth in the third quarter of 2024, while its Electrification segment achieved a remarkable 22% improvement. These strong results, coupled with strategic accomplishments, have bolstered investor confidence in the GEV stock.In a significant move last month, GE Vernova signed an expanded multi-year Strategic Collaboration Agreement (SCA) with Amazon Web Services (AWS). This partnership aims to support energy organizations in enhancing reliability, reducing costs and advancing energy transition goals. Additionally, in October 2024, the company secured a deal with Aula Energy and CS Energy to deliver 38 of its 6 MW–164-meter turbines for Australia’s Boulder Creek Wind Farm. With this agreement, the total 6 MW platform turbines in operation or under construction in Australia exceeded 250, reinforcing GE Vernova’s strong market presence.What Lies Ahead for GEV Stock?With rising renewable energy adoption worldwide, GEV predicts gas power generation to continue to grow at low single digits. This should continue to boost demand for GEV’s gas equipment and services, thereby bolstering the revenue generation prospects for its Gas Power business.On the other hand, GEV’s grid solution equipment and services should also continue to experience a robust growth trend in the coming years, with global electricity demand expected to rise at a faster rate over the next three years — an average of 3.4% annually through 2026 (as per the latest report published by the International Energy Agency). A quick sneak peek at GEV’s near-term sales estimates mirrors solid growth prospects.Estimates for GEV Send Mixed SignalsThe Zacks Consensus Estimate for 2024 and 2025 sales implies an improvement of 5.1% and 5.3%, respectively, year over year. The consensus estimate for 2025 earnings reflects similar growth.However, the Zacks Consensus Estimate for 2024 earnings per share has moved south 8.7% over the past 60 days. The downward revision in earnings estimates indicates analysts’ declining confidence in the stock.Image Source: Zacks Investment ResearchImage Source: Zacks Investment ResearchRisks to Choosing GEVDespite the aforementioned growth opportunities, there are certain challenges in the industry that one should consider before investing in GEV, particularly the challenges that the company is facing in the offshore wind industry. As the offshore wind sector grapples with rising costs, high interest rates and ongoing supply chain issues, GEV has been experiencing project cost pressure as a manufacturer of wind turbines. Evidently, in the third quarter of 2024, its revenues from offshore wind business declined as a result of slower execution. During the third quarter of 2024, primarily as a result of changes in product and project cost estimates, GEV recorded incremental contract losses for certain Offshore Wind contracts of $676 million. Further changes in execution timelines or other adverse developments might have an adverse impact on GEV’s cash collection timelines and contract profitability, resulting in losses beyond current expectations.GEV Trading at a PremiumIn terms of valuation, GEV’s forward 12-month price-to-earnings (P/E) is 53.14X, a premium to its peer group’s average of 13.75X. This suggests that investors will be paying a higher price than the company's expected earnings growth compared to that of its peers.Image Source: Zacks Investment ResearchShould You Buy GEV Now?Investors interested in GEV Vernova should wait for a better entry point, considering its premium valuation and the challenges it is facing in the offshore wind market.However, those who already own this Zacks Rank #3 (Hold) stock may stay invested as the company's upbeat sales estimates, benefits of steadily growing electricity demand as well as impressive share price performance in recent times indicate solid prospects.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Free Report: 5 Clean Energy Stocks with Massive UpsideEnergy is the backbone of our economy. It’s a multi-trillion dollar industry that has created some of the world’s largest and most profitable companies.Now state-of-the-art technology is paving the way for clean energy sources to overtake “old-fashioned” fossil fuels. Trillions of dollars are already pouring into clean energy initiatives, from solar power to hydrogen fuel cells.Emerging leaders from this space could be some of the most exciting stocks in your portfolio.Download Nuclear to Solar: 5 Stocks Powering the Future to see Zacks’ top picks free today.Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Constellation Energy Corporation (CEG): Free Stock Analysis Report Talen Energy Corporation (TLN): Free Stock Analysis Report Bloom Energy Corporation (BE): Free Stock Analysis Report GE Vernova Inc. (GEV): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks