The Zhitong Finance App learned that Morgan Stanley said in the latest research report released on November 12 that the fourth fiscal quarter results and the latest medium- to long-term performance guidelines announced by Siemens Energy (Siemens Energy) sent a positive signal about the long-term growth prospects of US power equipment giant GE Vernova (GEV.US). The bank believes that the continued improvement in profitability of the gas turbine business, strong demand for power grid equipment, and the long-term growth potential of the after-sales service business will drive GE Vernova's performance over the next few years to further exceed market expectations.
Morgan Stanley maintains GE Vernova's “Overweight” rating and a target price of $1,350. Compared to the stock's closing price of $808.24 on November 11, this target price represents a potential upside of about 67%.
Morgan Stanley analyst David Arcaro pointed out that with Siemens Energy's announcement of the latest interim results guidance, investors' focus on large power equipment manufacturers such as GE Vernova is shifting to 2030 performance targets. Siemens Energy's newly announced revenue growth and profit margin targets are generally in line with investors' expectations, further strengthening the bank's confidence in GE Vernova's long-term profit prospects.
Siemens Energy recently proposed that the Group's profit margin will reach 20% to 22% by 2030, which is 6 percentage points higher than the previous 2028 profit margin target based on the median range. Morgan Stanley expects GE Vernova to achieve a similar increase in profitability during the same period, and its profit margin before interest, tax, depreciation and amortization (EBITDA) is expected to rise by 5 percentage points from 22.9% in 2028 to 27.9% in 2030.
Notably, Siemens Energy emphasizes that achieving the latest performance targets does not require a further increase in product prices. This means that if the price of new orders continues to be strong in the future, there is still a possibility that the company's actual profit performance will further exceed the target.
Morgan Stanley believes this trend also applies to GE Vernova. The company's previously announced 2028 performance target is likely to be conservative. As high-margin orders are converted into revenue, the cost advantages brought about by the expansion of business scale gradually become apparent, and production efficiency continues to improve, its power and electrification businesses are all expected to achieve higher profit margins.
Specifically, Morgan Stanley predicts that GE Vernova's profit margin in 2027 will reach 23.1%, exceeding the 2028 22% target set by the company one year ahead of schedule; the profit margin for the electrification business is expected to reach 21.5% in 2027, which is close to its 2028 target of 22%.
The continued improvement in the profitability of gas turbine orders is another important reason why Morgan Stanley is optimistic about GE Vernova. Siemens Energy disclosed that the profit margin for on-hand orders for new gas turbine equipment in fiscal year 2026 increased by about 14 percentage points, while the profit margin for orders that have already been reserved for production capacity is currently even higher. The company's management also expects the sales price of the new devices in FY2027 to be even higher than the FY2026 level.
In contrast, GE Vernova previously disclosed that its profit margin on relevant orders in 2025 increased by 11 percentage points, and it is expected that the improvement will significantly exceed this level in 2026. Morgan Stanley believes that Siemens Energy's latest data provides a positive reference for evaluating GE Vernova's fourth-quarter results to be announced in January next year.
Furthermore, as GE Vernova has more high-priced orders in the US market, the bank remains optimistic about its future profitability. However, the actual margin improvement will still depend on the previous profit level and order structure.
Morgan Stanley's current forecast for GE Vernova's 2030 performance is significantly higher than Wall Street's general expectations. The bank expects the company's revenue to reach US$85.7 billion in 2030, which is about 8% higher than the market's consensus estimate of US$79.3 billion; EBITDA is expected to reach US$23.9 billion, which is about 17% higher than the market's forecast of US$20.4 billion.
Meanwhile, the bank expects GE Vernova's EBITDA margin to reach 27.9% at that time, which is higher than the 25.8% expected by the market. The power and electrification business will be the main driving force for profits exceeding expectations. Morgan Stanley's 2030 EBITDA forecast for these two businesses is about 15% and 16% higher than the agreed market expectations, respectively.
In addition to equipment sales, the gas turbine after-sales service business is also expected to become an important growth driver for GE Vernova after 2030.
Siemens Energy predicts that by 2035, its gas turbine service business revenue will more than double the current level, with an average annual growth rate of about 8%. The profit margin of the company's newly signed service contracts is about 5 percentage points higher than the existing orders in progress. As more large-scale gas turbines are put into operation, related long-term service agreements will further enhance business profitability.
GE Vernova has also previously stated that its gas turbine service business has revenue growth opportunities of about $10 billion by 2035.
Morgan Stanley believes that the current large-scale delivery of gas turbine equipment will create new growth space for the future after-sales service business. This means that even if gas turbine equipment orders gradually return to normal levels in the mid-2030s, GE Vernova is still expected to achieve profitable growth through an expanding equipment maintenance, repair and long-term service business.
On the other hand, in response to market concerns raised by the recent write-down of SoftBank's power equipment assets, Morgan Stanley believes that investors need not worry too much about the impact of individual customer cancellations on GE Vernova.
Earlier, SoftBank announced relevant asset write-down news, triggering market speculation that it might cancel GE Vernova gas turbine production capacity reservations and orders. Some investors estimate that the production capacity involved could reach about 4 gigawatts. However, the relevant details are still unclear, and the exact reason and scale of the cancellation of production capacity reservations have not been confirmed.
Morgan Stanley notes that GE Vernova's contractual protections generally allow it to keep an advance payment equal to 20% or more of the total equipment price when the customer cancels the order. As demand for gas turbines continues to be strong, the company is also expected to resell the released production capacity to other customers at a higher price.
Siemens Energy expects the global gas turbine market to maintain an annual demand scale of 130 to 150 gigawatts by 2035. Morgan Stanley believes this has further strengthened its confidence in GE Vernova's production capacity sales prospects. Even if individual customers delay or cancel orders, the company can still expect to sell at full capacity.
Looking at longer-term performance, Morgan Stanley expects GE Vernova's compound annual revenue growth rate to reach 9.6% by 2035, with the power business and electrification business growing at an average annual rate of 12% and 9%, respectively. The company's adjusted EBITDA profit margin is expected to rise from 14% in 2026 to 26% in 2035, while free cash flow is expected to increase from about US$12.5 billion in 2026 to approximately US$17 billion in 2030.
However, the bank also pointed out that delays in the delivery of offshore wind power projects and that grid operators are using related software products at a lower speed than expected are still the main downside risks GE Vernova will face in the future.
Looking ahead, Morgan Stanley believes that Siemens Energy's latest performance guidelines, gas turbine order pricing, and after-sales service business prospects all provide a positive reference for GE Vernova's long-term growth. Next, the market will focus on GE Vernova's fourth quarter results announced in January next year, and the Investor Day event expected to be held before the summer of 2027. At that time, the company is expected to announce new 2030 performance targets.