GE Vernova Downgraded

GE Vernova (NYSE: GEV) has been downgraded to “Hold” from “Buy” by analysts at HSBC, citing concerns that the energy equipment maker’s offshore segment will negatively affect its wind business.

In a client note on Friday, analysts observed that GE Vernova’s power and grid equipment supply unit is expected to benefit from improving gas turbine demand and secular growth in grid equipment.

They mentioned that GE Vernova’s upcoming investor day on Dec. 10, where an updated medium-term forecast will be presented, could act as a potential catalyst for the stock price.

However, the analysts highlighted risks associated with higher-than-expected costs related to the delivery of a $3 billion offshore wind backlog. These comments follow CEO Scott Strazik’s warning that the wind segment is set to lose around $300 million this quarter while addressing the order backlog.

The HSBC analysts stated,

“We believe GE Vernova will struggle to find available installation vessels to make up for delayed offshore wind deliveries.”

Last month, GE Vernova announced plans to downsize its challenged offshore wind division, citing the effects of cost inflation and supply chain constraints on the sector. According to Reuters, these cuts could result in the loss of 900 jobs worldwide, although specific locations for the cuts were not disclosed.

Delays have also been reported for two key projects, one off the coast of Massachusetts and another in the UK, attributed to issues with turbine blades.

Shares of GE Vernova saw a slight increase in early US trading on Friday and have surged approximately 98% so far this year. Analysts noted, however, that GE Vernova currently has a high valuation, suggesting limited further upside potential.

*(Reuters contributed reporting.)