General Electric (NYSE:GE)
Barclays Capital analysts said on Wednesday that investors need to give General Electric’s (NYSE:GE) energy unit more credit for its expansion prospects. Profit projections for GE Vernova, the industrial conglomerate’s rebranded power and renewable energy division, were increased.
According to Julian Mitchell, an analyst at Barclays, “there is ‘undiscovered’ value at Vernova, where we slightly raise estimates,” as stated in a research published on June 7. Vernova is worth closer to $20 per share, even though most investors only value it at $10 to $15 per share, or 0.3 times to 0.5 times sales.
According to Barclays, GE Vernova is worth around 0.9 times 2024 revenues, which works out to an enterprise value to EBITDA multiple of 15.5x in 2024 and 11x in 2025. On Wednesday, Barclays updated its price objective for GE stock from $115 to $125 in light of the company’s greater value thanks to the success of its GE Vernova division.
Within the next several years, GE (GE) plans to spin off GE Vernova as part of a larger strategy to break into three firms. GE Aerospace is the only survivor of the old industrial giant. At the start of this year, GE HealthCare Technologies (GEHC) was separated from GE and started trading on the Nasdaq.
GE Vernova manufactures wind turbines and gas turbines that run on natural gas. Since General Electric’s (GE) inception, its power-generation division has been a moneymaker. In recent years, as the world has worked to cut down on emissions of greenhouse gases, the company has faced accounting challenges and worries about its survival. The company has experienced supply-chain problems and price increases in its onshore wind turbine sector.
Barclays notes that valuing GE Vernova is challenging since most of the company’s competitors are in Europe or Asia, and the renewable energy division has been losing money. The company said that more information on GE Vernova is expected to be shared with investors during GE’s (GE) annual investor day in the fourth quarter.
Investors are paying more attention to the company in anticipation of the spinoff, and Barclays believes this might significantly affect GE stock value.
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