GE Vernova downgraded to Hold by HSBC

GE Vernova has been downgraded to “Hold” from “Buy” by analysts at HSBC, who express concerns that the company’s offshore segment will negatively impact its wind business.

In a note to clients, the analysts highlighted that GE Vernova’s power and grid equipment division is expected to benefit from strengthening demand for gas turbines and ongoing growth in grid equipment. They also pointed out that the company’s upcoming investor meeting on December 10, where it is set to present an updated medium-term forecast, could act as a potential catalyst for the stock’s price.

Nonetheless, the analysts raised concerns about risks associated with “higher-than-expected costs” related to fulfilling its $3 billion offshore wind backlog. Their remarks follow a warning from Chief Executive Scott Strazik that the wind segment is projected to incur losses of approximately $300 million this quarter as efforts are made to address the order backlog.

The HSBC analysts stated, “We believe GE Vernova will struggle to find available installation vessels to compensate for delayed offshore wind deliveries.”

The company revealed plans last month to downsize its challenged offshore wind division due to the effects of cost inflation and supply chain challenges affecting the overall industry. Reports suggest that these cuts could result in approximately 900 job losses globally, although the specific locations for these reductions were not disclosed.

Additionally, GE Vernova has encountered delays with two significant projects off the coasts of Massachusetts and the UK, attributed to issues with its turbine blades.

In early trading on Friday, shares of GE Vernova saw a slight increase, with the stock having risen nearly 98% this year. However, analysts from HSBC pointed out that the company currently possesses a “high valuation,” indicating limited potential for further growth.