GE Vernova stock faces a crucial test: will GEV rise after earnings?

GE Vernova stock price surged this year and reached its all-time high, continuing a trend that started when it went public in March last year. It has surged to a record high of $575, up by 400% from its opening price of $114. 

This surge has brought its market capitalization to over $156 billion, and will be put to the test when it reports its earnings this week. 

Why GE Vernova stock price has surged

GE Vernova is a large company that was part of the General Electric conglomerate until last year, when it became an independent company. It was the final separation after the company shed its healthcare business to become GE Healthcare. 

GE Vernova is focused on the power, wind, and electrification. In its power segment, the company manufactures turbines in the gas, steam, hydro, and nuclear energy. 

Its wind business is involved in the onshore and offshore, while its electrification business is in the grid solutions, power conversion, and solar.

The GEV stock price has surged since its separation due to the ongoing power demand, particularly driven by artificial intelligence (AI) demand. The demand for power in data centers of all types has led to a surge in sales over the years. 

This demand has driven the stock prices of other companies in the industry significantly higher. For example, Rolls-Royce share price has surged to a record high, while Siemens Energy is one of the best performers in the DAX Index.

The company has published strong financial results since going independent. Its most recent results showed that its order backlog jumped to $45 billion, led by its electrification business. This was followed by the power and wind businesses. 

The results also showed that its quarterly revenue rose to $8 billion from $7.3 billion a year earlier. Consequently, its adjusted EBITDA jumped to $500 million. 

Its power division had orders of 29 heavy-duty gas turbines, which helped its revenues to jump by 16%. The same happened in the electrification business, whose orders jumped because of the surging demand for grid equipment.

The only blemish in its business was its wind energy business whose revenue and profits remain under pressure. This division will likely remain on edge as interest rates stay at an elevated level.

Earnings and valuation

The next key catalyst for the GE Vernova share price will be the upcoming earnings, which will shed more color on its business. 

Analysts expect these earnings to show that the revenue rose by 7.1% in the second quarter to $8.79 billion. Its earnings per share is expected to be $1.5, an improvement from the $1.02 it made last year. 

Odds are that the company’s business will publish better results than expected as it has done before. 

The company will likely continue returning funds to investors. It returned $1.3 billion to shareholders through dividends and buybacks. 

The main concern with GE Vernova is that it is highly overvalued and overbought. It trades with a forward P/E ratio of 77, much higher than the sector median of 22. 

GEV stock chart analysis

The daily chart shows that the GEV stock price has been in a strong bull run since going public last year. It jumped from a low of $114 in March last year to $574 today.

The stock price has remained above all moving averages, a sign that bulls remain in control. It has also remained above the psychological point at $500. 

The Relative Strength Index (RSI) has moved to the extremely overbought point at 78. Therefore, there is a risk that the stock will pull back after its earnings. If this happens, the stock will likely drop to the support at $500.

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