General Electric’s (GE) valuation is expected to receive a boost from the improving free cash flow of its renewable energy business, GE Vernova, BofA Securities said in a report Thursday.
The brokerage maintained its buy rating on the stock as it raised its price target to $175 from $162, taking into account GE Vernova’s “better FCF trajectory” and GE Aerospace’s revenue growth visibility.
GE Vernova, which is expected to spin off from GE on April 2, reaffirmed its full-year 2024 outlook on Wednesday for revenue of $34 billion to $35 billion, with an adjusted EBITDA margin being at the higher end of the mid-single digit range.
The guidance looks conservative as GE Vernova’s backlog “provides a high degree of visibility, with [about] 50% of 2025 revenue already in the backlog,” BofA said.
“The pending spinoff of Vernova creates a catalyst for re-rating over time. Over the medium term, improving FCF should support share price appreciation,” BofA said.
General Electric shares rose 2.6% in recent trading.