The GE Vernova stock price suffered a harsh reversal as it plunged by over 10% in a single day. It bottomed at $614, down by 15% from its highest level this year, erasing some of the gains it made recently when it boosted its payouts to investors.
GE Vernova stock price drops amid AI concerns
GE Vernova, a company that makes energy turbines, has come under pressure in the past few days as investors remain concerned about the AI industry.
The company has increasingly become an AI play because of the vast amount of energy needed to power data centers in the US and around the world.
This demand has helped to turn it from a traditional boring company into a growth one, with utilities seeking to boost their power output.
In its recent investor day event, the company boosted its forward guidance as its growth trajectory accelerated. It now expects that its revenue will surge to $58 billion in 2028, much higher than the previous guidance of $45 billion. It expects to make $37 billion and $42 billion this year and in 2026.
Most importantly, the expected growth trajectory will be accompanied by high margins, with the adjusted EBITDA margin moving from 9% this year to 20% in 2028.
The company also expects that the backlog will be $200 billion, up sharply from the previous guidance of $135 billion. This growth will partly be because of a sharp increase in its electrification business.
GE Vernova’s management expects to boost its free cash flow to $22 billion between 2025 and 2028, a move that will help it to boost its shareholder returns.
Indeed, the company has already boosted its dividend from $0.25 to $0.50 per share, and its share repurchases from $6 billion to $6 billion.
Therefore, the GE Vernova stock price has crashed as investors raise doubts about its highly ambitious goals amid fears that the AI bubble will pop. Such a move will, in theory, lead to project cancellations and slowdowns.
Concerns about the AI bubble have risen after some companies like Oracle and Broadcom published mixed financial results. Investors are worried that some of the large orders made by companies like OpenAI may disappoint over time.
While the AI fears are real, chances are that a company like GE Vernova will not be affected because the rising power and energy demand will continue in the foreseeable future.
The GE Vernova stock has also plunged as investors sell the recent news on dividends, buybacks, and share repurchases. This is a situation where investors buy an asset after a major announcement and then exit when it happens.
Most importantly, the company has received a tech-like valuation, with the forward price-to-earnings ratio rising to 97 and its Seeking Alpha valuation grade of F.
Meanwhile, analysts have mixed opinions on the company, especially on whether it will be able to achieve its goals. In a recent note, an analyst from Oppenheimer upgraded it from perform to outperform, while Seaport downgraded it from buy to neutral, citing its valuation.
GE Vernova stock price technical analysis
The daily timeframe chart shows that the GEV stock price soared to a high of $730 earlier this month after boosting its revenue and guidance.
It then retreated to the current $614 as investors booked profits. The retreat brought it inside the bullish flag pattern that formed a few months ago.
That is a sign that it has formed a break-and-retest pattern, which is a common bullish sign. It has remained above the 50-day and 100-day Exponential Moving Averages.
Therefore, the stock will likely remain under pressure in the near term as the AI jitters continue. It will then bounce back and possibly hit the year-to-date high in the coming weeks or months.
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