With General Electric’s (NYSE:GE) wind energy and Aviation businesses looking poised to take off soon, GE stock continues to have multiple, strong, positive catalysts.
These catalysts should boost the shares in the short-term, medium-term, and long-term. Meanwhile, the outlook of GE’s gas-turbine business continues to be quite powerful.
Given these points and the still-low valuation of the conglomerate’s stock, I continue to recommend that investors buy the shares.
A Closer Look at GE Stock
On Dec. 2, Vineyard Wind announced that it had chosen GE’s Haliade-X as the preferred supplier for its Vineyard Wind 1 project. According to Vineyard, the 800-megawatt project will be the first utility-scale offshore wind installation in the United States.
Taken together, GE’s Dogger and Vineyard wins bode very well for Haliade-X’s outlook in the U.S., Europe, and the world. That positive outlook, in turn, is a good sign for GE stock.
Importantly, global wind-power capacity is expected to jump by a huge 348 gigawatts by the beginning of 2025, according to the Global Wind Energy Council (GWEC) trade association. In 2021, a record 78 gigawatts of new wind power are expected to be deployed, the association estimated.
With GE’s Haliade-X looking like a strong player in the offshore-wind sector and GE’s onshore-wind turbines already garnering a meaningful amount of market share, the company and GE stock seem poised to get tremendous boosts from the increased use of wind power.
As for Aviation, I’ve previously predicted that the vaccines for the novel coronavirus will increase air travel much more rapidly and strongly than many believe. With one vaccine already being distributed in the U.S. and another on the way within a few weeks, I’m even more confident in that thesis now.
Meanwhile, the business should also benefit meaningfully from the FAA’s recent approval of Boeing’s (NYSE:BA) 737 MAX planes, for which GE has made engines.
Seeking Alpha’s Adam Levine-Weinberg recently estimated the company’s free cash flow could reach $7 billion by 2025.
The Gas-Turbine Business Should Be Strong
While Musk said it would take 20 years to reach that point, in five years, 20% of the world’s cars could be electric, increasing global electricity demand by 20% and by more than that in some countries.
As a result, many more power plants, including gas-powered power plants, will have to be built. Many more wind turbines will have to be added as well. That trend will boost GE’s gas turbine business, while also enabling it to sell many more wind turbines and other types of electrical equipment.
Meanwhile, GE’s gas-turbine business seems to have made a significant number of meaningful deals recently. For example, GE recently agreed to sell 11 gas turbines to a German power company, RWE. The American conglomerate also recently won a deal to supply its gas turbines to a 500-megawatt plant in South Korea and to a 90-megawatt plant in Argentina.
In a statement, Aman Joshi, Senior Global Sales Director for the Aeroderivative business at GE Gas Power said the expansion of renewable energy internationally would pressure the grid infrastructure. He maintained that gas turbines would be a significant part of developing and maintaining that grid.
The Bottom Line on GE Stock
The congomerate’s aviation and renewables businesses should get huge boosts soon, while its gas turbine sales appear to be strong.
With GE stock still trading at less one time analysts’ average 2021 sales estimate, despite the shares’ recent rally, the name remains very attractive.
On the date of publication, Larry Ramer held a long position in GE.
Larry has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Among his highly successful contrarian picks have been solar stocks, Roku, and Snap. You can reach him on StockTwits at @larryramer. Larry began writing columns for InvestorPlace in 2015.