Baird Capital Markets on Wednesday upgraded GE Vernova to an Outperform rating, saying the market has underestimated how far off potential overcapacity in gas-fired power may be and that GE Vernova is well placed to capture gains as the energy-infrastructure cycle grows.
Analyst Ben Kallo explained the decision to move the stock back to Outperform, stating that Baird views the industry cycle as still being in the early innings and that GE Vernova is positioned as one of the largest beneficiaries. Kallo said earlier concerns over industry overcapacity "will not materialize in the near- to intermediate-term," basing that view on recent checks conducted at conferences, conversations with investors and commentary from companies.
Baird emphasized that margin expansion at GE Vernova is only beginning. The firm models adjusted EBITDA margins rising to 13.2% for full-year 2026, up from 8.4% in 2025, and ultimately approaching 20% to 21% by 2030. Baird identified three primary levers behind the projected margin improvement: higher priced equipment, greater flow-through from service contracts and cost reductions from lean initiatives.
Services are expected to be a key engine of profitability growth. Baird forecasts services gross margins of 38.5% in 2030, compared with 31.3% in 2025, highlighting the companys service mix as central to long-term margin trajectories.
The firm also pointed to backlog strength as a supporting factor. GE Vernova exited 2025 with 83 gigawatts of gas turbine capacity contracted, with roughly half booked as firm orders and the other half as slot-reservation agreements. Management has indicated expectations that remaining slots for 2029 and 2030 will sell out by the end of 2026, which Baird noted would leave no available capacity through the remainder of the decade.
Reflecting these assumptions and projections, Baird raised its price target for the stock to $923, up from $701.
Implications
- Energy infrastructure and power equipment manufacturers may see demand dynamics shift if slot reservations convert to firm orders.
- Services and aftermarket operations could become a larger share of revenue and profit for companies with significant installed bases.
- Margins for companies supplying higher-priced equipment could expand if pricing power persists and cost initiatives deliver.
Quotation
In Bairds assessment, "this energy infrastructure cycle is still in the early innings and GEV is squarely positioned as one of the biggest beneficiaries."