GE Vernova: Grid- and Power-Led Order Conversion Strengthens Growth, While Valuation Assumptions Stretch Higher

What happened

Utilities are set to invest roughly $1.1 trillion in grid expansion and modernization, and GE Vernova is increasingly well-positioned to capture that spend as data center–driven load boosts demand for its Electrification and Power offerings. The new analysis emphasizes that Electrification orders and the Prolec GE acquisition should translate GEV’s robust backlog into margin-accretive growth, aligning with DeepValue’s view of Electrification as a key driver of rising RPO and future cash conversion. Together with data-center-linked 7HA CCGT orders and a services-rich Power installed base, these dynamics support a multi-year ramp in EBITDA and free cash flow that can more than offset persistent Wind segment weakness. Financially, the company has already inflected to positive net income and $1.7 billion in 2024 FCF, is tracking to $1.2 billion of adjusted EBITDA in 1H25, and is backing this trajectory with a $6 billion buyback authorization, a new dividend, and $8.2 billion in liquidity. The Seeking Alpha Strong Buy call layers on a $665 price target and an implied 53x eFY26 EV/aEBITDA, which presumes strong execution on order conversion and pricing but also pushes valuation assumptions toward the upper end of what fundamentals alone currently justify.

Implication

For investors, the combination of massive grid capex, AI/data center–driven firm capacity additions, and a $119 billion RPO underpins durable revenue visibility, with Electrification and Power poised to drive structurally higher margins as backlog converts. The Prolec GE acquisition enhances GEV’s position in transformers and should help accelerate and enrich Electrification’s revenue mix, partially offsetting Wind’s ongoing margin drag and supporting free cash flow growth. Strengthening cash generation, together with the new $6 billion repurchase authorization and initiated dividend, provides an additional layer of downside support so long as project execution and RPO conversion remain on track. However, investors should treat valuation frameworks built on >50x eFY26 EV/aEBITDA as optimistic scenarios rather than base cases; more conservative multiples still allow for upside but acknowledge residual risks in offshore wind and complex project delivery. Practically, this argues for maintaining or building positions on volatility—especially around wind headlines or macro energy sentiment—rather than chasing aggressive price targets that already bake in near-flawless execution on grid and gas opportunities.

Thesis delta

The core BUY thesis is intact and incrementally strengthened on the quality-of-earnings side: the Prolec GE acquisition and clearer evidence of Electrification and Power order conversion bolster confidence in a margin-accretive growth trajectory underpinned by grid and data-center demand. At the same time, the external Strong Buy framing leans on a richer out-year multiple than we are prepared to underwrite, so our stance remains a fundamentals-led BUY rather than a valuation-stretch call anchored at ~53x eFY26 EV/aEBITDA. Net, absolute growth and cash-flow visibility have improved, but the risk/reward skew is slightly less asymmetric if the market increasingly prices in these optimistic scenarios.