GE Vernova (GEV 3.51%) completed its spinoff from parent General Electric (now GE Aerospace) last week, and at least one analyst seems to be more positive about the new company's prospects. While JPMorgan analyst Mark Strouse initiated coverage on the global energy company telling clients to wait and just hold shares, he has just released the first upgrade for the spinoff to the equivalent of a buy rating.
Strouse has a $141 price target on GE Vernova shares. The stock began trading on April 2 and shares jumped to over $150 per share before closing down last week at about $123. Given the stock's current price of around $133, Strouse's price target implies a potential gain of about 6% over the next 12 months or so.
Strouse's quick upgrade was likely prompted by the downward movement in the stock in its first week of trading. It also takes some time to digest the details and new financial status of a spun-off company like GE Vernova.
Each holder of record of General Electric (GE) common stock received a share of GE Vernova for every four shares of GE common stock held on March 19, 2024. However, investors now need to evaluate GE Vernova's business on its own merits without considering the state of the former GE parent.
That means a belief in GE Vernova's view of a global transition to cleaner energy. In a March 2024 presentation to investors, GE Vernova CEO Scott Strazik put the investment case succinctly, saying, "The energy transition is the next investment supercycle."
As Strouse opines, now looks to be a good time to invest in GE Vernova based on its valuation. It currently trades with a price-to-sales (P/S) ratio of just 1 based on the company's current-year sales projection. Excluding potential acquisitions, management expects mid-single-digit annual sales growth for at least the next several years. That makes for a compelling case for an investment at recent levels.