In late pre-market trade the stock is down $1.57 (-0.25%) at $621.00. This follows Friday's slaughter of the innocents, down $58.36 (-8.57%) to $622.50.
Here's Al Root at Barron's January 9/11:
An age-old problem for the stock market is that when things are really good in a certain business, it invites competition. That makes conditions less positive down the road. That scenario could play out for the power-generation technology company GE Vernova, according to one analyst who follows the stock.
Vernova’s performance has been nothing short of amazing. The stock has more than quadrupled since the company was spun out of General Electric, now GE Aerospace, in April 2024. Estimates for 2028 earnings before interest, taxes, depreciation, and amortization have gone from below $5 billion to almost $11 billion over that span.
Higher growth in electricity demand, partly because of data centers for artificial intelligence, has pushed up pricing for Vernova’s turbines and filled its order book for years to come. The problem is that good times draw a crowd.
Baird analyst Ben Kallo downgraded GE Vernova stock on Friday to Hold from Buy, cutting his price target to $649 a share from $816. That is a big cut: The $167 difference amounts to about $45 billion of market value.
Kallo says he is worried about “potential oversupply” as competitors announce additions to production capacity. Almost anyone with turbine technology is now considering entering power generation, including Doosan, supersonic jet start-up Boom Technology, and FTAI Aviation. Caterpillar, which has long had a generator business, is another player.
“While we believe the market remains tight (particularly in the near term), we see these announcements and oversupply fears shifting sentiment for a consensus long,” wrote Kallo. That means the market, now convinced that Vernova is a winner, could change its mind.
Shifting sentiment can shift valuation multiples—a risk Kallo is concerned about. Today, GE Vernova trades for about 20 times estimated 2027 Ebitda, while comparable industrial stocks in the S&P 500 trade for closer to 16 times.
“Our long-term outlook for GE Vernova as a leader in both Power and Electrification, and viewing GE Vernova as a core holding, are unchanged, but we are moving to the sidelines,” he wrote....
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He's right.
Warren Buffett ran into similar situations in Berkshire's reinsurance business. When re profits were good, everyone and his brother would flood into the market, writing policies at prices that Warren didn't think covered the risk. Rather than withdrawing completely he continued to offer policies at prices he thought were fair while telling the insurance companies that needed reinsurance cover that Berkshire would be there when the others had skedaddled.
The same is true for GE Vernova. They've been manufacturing and servicing turbines since Thomas Edison and J.P. Morgan formed the General Electric Company in 1889.
They'll be around to come make a service call when you think your turbine is making a funny sound.
In the meantime, should you prefer a small modular nuclear reactor they have those too,
And wind, if that comes back into favor.
