GE Vernova (GEV) shares are expected to remain on watchlists Wednesday after reaching a new record high following positive coverage from leading investment banks. Analysts argue that the stock is undervalued compared to its multi-industry peers due to its greater exposure to the gas and electrification sectors. However, investors should be cautious of a potential short-term retracement as the relative strength index (RSI) indicates extremely overbought conditions in the stock.
Favorable Coverage from Investment Banks
Barclays initiated coverage of GE Vernova with an “overweight” rating and a price target of $250. Bank of America analysts also upgraded the stock to a “buy” rating and raised their price target to $300 from $200. These banks believe that the stock is undervalued compared to its peers due to its exposure to the gas and electrification sectors, which are expected to experience significant growth in the coming years.
Strong Performance Since Spin-Off
Since being spun off from GE Aerospace on April 2, GE Vernova shares have gained 69%. The stock has also gained 18% since the start of September. This strong performance is attributed to the company’s greater exposure to sectors that are expected to grow, such as artificial intelligence (AI) data centers and electric vehicle (EV) charging infrastructure.
Technical Analysis and Key Price Levels
GE Vernova shares have been trending higher since they started trading, with a brief period of consolidation between late May and early August. The stock resumed its uptrend last month and recently broke out from a pennant pattern, indicating upside continuation.
However, investors should be aware of a potential retracement, as the RSI indicates overbought conditions with a reading above 80. In early May, the stock traded sideways for several weeks after the RSI flashed overbought conditions.
During periods of weakness, investors should monitor two key chart levels. The first level is $200, where the shares would likely find support from the psychological round number and the top of the pennant pattern. If the stock fails to hold this level, it could retest the $185 region, where it finds support from the prior trading range’s upper trendline and the 50-day moving average.
Upside Price Target
If the shares continue to trend higher, the measuring principle can be used to project an upside price target. By calculating the distance of the trending move that preceded the pennant and adding that amount to the pattern’s breakout point, an upside target of $250 is forecasted.
Conclusion
GE Vernova shares have reached a new record high following positive coverage from investment banks. The stock is considered undervalued compared to its peers due to its exposure to the gas and electrification sectors. However, investors should be cautious of a potential short-term retracement, as the RSI indicates overbought conditions. Key price levels to watch are $200 and $185, while the upside price target is $250.
