GE Vernova's Policy-Driven Stock Surge Faces Overvaluation Scrutiny

What happened

The Trump administration and a group of governors have proposed a plan to address rising power costs by making tech giants fund new power plants, potentially boosting demand for GE Vernova's gas turbines and grid solutions. This news has fueled a stock surge for GE Vernova, reflecting market excitement about policy tailwinds in the energy sector. However, the latest DeepValue master report critically assesses the company as a 'POTENTIAL SELL,' citing a valuation of 99x P/E and 98x EV/EBITDA that prices in near-perfect execution of aggressive 2026-2028 growth targets. The report emphasizes high execution risks, including the need to achieve 11-13% EBITDA margins and $4.5-5.0B free cash flow in 2026, amid ongoing losses in the wind segment and competitive pressures. While policy initiatives may support order growth, the stock's premium leaves no margin of safety, making it vulnerable to any operational shortfalls.

Implication

The policy move could enhance near-term demand for GE Vernova's power and grid equipment, potentially supporting backlog growth and revenue targets. However, the stock's extreme valuation at 99x P/E already discounts this optimism, leaving little room for error and increasing vulnerability to multiple compression. Critical risks include potential misses on 2026 EBITDA margins below 10% or free cash flow under $4.0B, which could trigger a reassessment of the aggressive growth narrative. Additionally, the wind segment's persistent losses and industry capacity expansions threaten pricing power, undermining the path to 20% margins by 2028. Therefore, investors are better off avoiding new purchases or trimming positions until the price resets closer to $450 or operational evidence clearly outperforms expectations.

Thesis delta

The policy announcement reinforces the structural demand themes from AI and grid modernization that underpin GE Vernova's bullish case, but it does not mitigate the valuation concerns or execution risks highlighted in the DeepValue report. The core thesis remains unchanged: the stock is overvalued and a 'POTENTIAL SELL' due to its premium pricing and high dependence on meeting aggressive financial targets. A shift would only occur if GE Vernova demonstrates sustained margin expansion or free cash flow outperformance in the next 6-12 months.