GE Vernova (GEV 0.12%) is an energy business spun off from General Electric in 2024. General Electric had been in business for over 130 years, with primary operations in healthcare, energy, and aerospace. However, management ultimately believed it could serve its customers and shareholders better by separating these businesses into three standalone companies.
Investors are attracted to GE Vernova stock because its business enjoys stable demand. But it also has exposure to more exciting growth markets, such as renewable energy and artificial intelligence (AI).
Stock
How to buy
How to buy GE Vernova stock
Before reviewing the various aspects of GE Vernova's business and financials and determining whether it would make a good addition to a diversified stock portfolio, potential investors should understand how to buy stocks.
Step 1: Open a brokerage account
The first step to investing in stocks, including GE Vernova, is to open a brokerage account. These days, this usually means opening an online brokerage account that offers trading with zero fees and no account minimums. Most brokerages are comparable, so I usually recommend that investors find a brokerage with a user interface that makes the most sense to them.
Step 2: Figure out your budget
The second step to investing is also personal: a budget. As a general rule, because returns can be volatile, investors shouldn't allocate money they might need within the next five years to the stock market. Investors should also divide the overall budget into about 25 pieces to avoid investing too much money in a single idea.
Step 3: Do your research
Third, investors need to research their various investment ideas properly. Using GE Vernova stock as an example, a potential investor would want to understand how the energy market generally works and whether management routinely reaches its goals.
Step 4: Place an order
Finally, once the research is complete, investors can place a trade in their brokerage accounts. The screenshot below shows everything needed to buy a stock in a Fidelity account.
As pictured above, investors need to select the account they're trading from, the correct stock ticker (for GE Vernova, the symbol is GEV), whether they want to buy a specific number of shares or fractional shares, and whether the trade should be executed with a market order or a limit order. The Fool recommends a market order since it guarantees you'll be able to buy the shares at the current price.
Should I invest?
Should I invest in GE Vernova stock?
Investing is personal, so there isn't one right answer when deciding whether to invest in GE Vernova stock. To best answer this question, investors must be familiar with the business and decide whether it fits their investment style and portfolio needs.
GE Vernova generates revenue from both products and ongoing services. For example, it may sell a gas turbine to generate electric power, which is a one-time sale. But then, it may generate revenue for 10 years or more from contracted services. The company's revenue is almost evenly split between products and services, with the majority of its backlog for services.
GE Vernova's revenue has a degree of predictability because of its robust backlog, which may appeal to investors who favor stability. But the company also has some higher-growth opportunities, which could appeal to more forward-thinking investors.
Looking forward, megatrends are fueling the consumption of electricity like never before. For example, AI workloads consume more power than workloads from traditional software. This reality is expected to drive power usage at data centers.
According to recent research from Goldman Sachs (GS -0.25%), data centers accounted for 3% of U.S. electricity needs in 2022 but could surge to 8% by 2030. That power must come from somewhere, and GE Vernova believes it will be a key enabler of the trend.
For another example, legislators worldwide are mandating higher sales of electric vehicles (EVs), which also increases power needs. California, for example, will require 100% EV sales by 2035. But a 2023 study by the Pacific Research Institute found the state's electric production will fall 21% short of what's needed for this mandate. In short, California needs more power.
The point is that secular trends require more power production than ever, which is something in GE Vernova's favor. People are also demanding cleaner energy, yet another advantage for GE Vernova.
The company has operations in hydropower and nuclear energy and is also a leader in wind energy. As the world transitions to cleaner power generation, all these resources could enjoy strong demand in the coming years.
Profitability
Is GE Vernova profitable?
GE Vernova is a profitable company right now, and General Electric was profitable for decades leading up to the spin-off of GE Vernova. However, its profitability needs additional context to be helpful to investors.
Certain charges related to the spin-off are affecting GE Vernova's net profit. So, it might be better to look at the company's operating profit, which considers the business operations in isolation.
General Electric spun off GE Vernova in 2024. Investors consequently can't look back through decades of data. But in the first half of 2024, the company had an operating income of $238 million, representing an operating margin of about 1.5%.
GE Vernova's profits might be higher without its offshore wind business. The company's three business segments are power, electrification, and wind. The power and electrification segments had positive earnings before interest, taxes, depreciation, and amortization (EBITDA) in the first half of 2024 and the comparable period of 2023. But its wind segment had EBITDA losses during both periods.
That said, GE Vernova is improving when it comes to its wind business. Other parts of the business have better margins, consistently leading to overall profitability.
Dividends
Does GE Vernova pay a dividend?
Prior to the spin-off, General Electric had paid a dividend for decades. The other new General Electric standalone stocks, GE Aerospace (GE 0.71%) and GE HealthCare Technologies (GEHC -1.43%), both pay quarterly dividends now. But GE Vernova stock does not.
ETF options
ETFs with exposure to GE Vernova
For people who like GE Vernova but are still uneasy about picking a single stock, exchange-traded funds (ETFs) offer a compelling alternative. Rather than pick one stock, these funds offer a collection of stocks based on particular themes.
Exchange-Traded Fund (ETF)
The First Trust Us Equity Opportunities ETF (FPX 0.81%) follows the largest stocks for initial public offerings (IPOs) and spin-offs. To be a potential investment, a stock must have gone public within the last four years. As of August 2024, GE Vernova was the 12th-largest position in this ETF, with an almost 2% weighting.
The Industrial Select Sector SPDR Fund (XLI 0.1%) is another ETF for people seeking exposure to GE Vernova stock. This ETF follows some of the largest industrial stocks from the S&P 500 index. GE Vernova was added to the S&P 500 as soon as it was spun off from General Electric, which is how it qualified for the Industrial Select Sector SPDR Fund ETF. It makes up a little more than 1% of the fund.
Stock splits
Will GE Vernova stock split?
Investors can't predict the future, and GE Vernova stock could split eventually. However, it's very unlikely to happen anytime soon for one simple reason.
General Electric spun off GE Vernova in early 2024. At the time of this event, its share count was likely close to what management considered ideal. GE Vernova stock would probably need to provide multibagger returns before the price per share would be high enough for management to consider splitting it and bringing the price back down.
Related investing topics
The bottom line on GE Vernova
GE Vernova is a major global energy business. The company sells power generation, transmission, and storage equipment and provides ongoing services to support its installed hardware base. A large backlog of business provides visibility into the future.
For investors who appreciate an established business with growth opportunities in exciting trends, GE Vernova is a blue chip stock to consider.
FAQ
Investing in GE Vernova FAQ
Is GE Vernova stock a buy right now?
There's no single right answer when it comes to buying GE Vernova stock right now because investment decisions are personal.
GE Vernova has substantial remaining performance obligations, which provides reasonable confidence that the business will continue to do well. Management has also recently made decisions to boost profits, which can make it an attractive investment.
Is GEV a good investment in 2023?
GE Vernova is well positioned for many important trends. It should be able to grow revenue at a modest pace and improve its profit margins. If it can do both, the stock could provide investors with positive long-term returns.
What is the highest GE Vernova stock has ever been?
GE Vernova stock has traded for less than a year in August 2024, so its history is quite short. Its shares reached $183 per share in July 2024.
