Morgan Stanley Flags Deepening SpaceX-Tesla AI Ties Ahead of SpaceX IPO

Eaton CEO Paulo Ruiz told investors at Morgan Stanley's 14th Annual Laguna Conference on September 16 that the company is targeting the high end of its 11%–13% organic growth guidance for 2026, sending shares up about 7.9% over five trading days to close at $424.77 on September 18. Ruiz said Eaton expects to have added roughly $10 billion in revenue between 2024 and 2026, about 10 times the top-line growth of the prior decade, with data center demand driving most of that increase as orders climbed about 85% and revenue rose roughly 65%. Eaton's globally announced project pipeline has accelerated to 342 gigawatts from the 307 gigawatts cited on the second quarter earnings call, and the company raised projected 2026 sales for its Boyd Thermal unit to $1.8 billion from $1.1 billion. Eaton reported second quarter 2026 revenue of $8.53 billion, up 21% year over year, with adjusted earnings per share of $3.15 and segment margins of 23.1%. Analysts responded positively, with Baird initiating coverage at Outperform with a $500 target, RBC Capital raising its target to $512 from $484, Evercore ISI upgrading to Outperform with a $502 target, and BMO Capital and Citi moving to $487 and $485 respectively, giving Eaton an average 12-month price target of $510.

Wall Street analysts are sharply divided on GE Vernova, with price targets on the power and grid technology company spanning from $470 to $1,450 a share. GLJ Research analyst Gordon Johnson recently initiated coverage with a sell rating and a $470 price target, about 50% below the stock's recent trading price of around $940 and below its 52-week low of $530 hit last November, citing a roughly 39-times forward earnings multiple he considers unjustified for a cyclical company. Guggenheim's Joseph Osha holds the Street-high target of $1,450, nearly 55% above the recent share price, based on hyperscaler demand for transformers and gas turbines, margin expansion from a higher-priced backlog, and multi-decade cash flow from long-term service agreements. The average analyst price target is over $1,200 a share, and of the nearly 40 analysts covering the stock, 30 rate it a buy or higher while all others except Johnson rate it a hold. The company's orders surged 88% in the second quarter to $24.2 billion, it booked $5 billion of data center orders in the first half, and its gas power equipment backlog and slot reservation agreements grew to 116 GW from 100 GW, with CEO Scott Strazik expecting 125 GW by year-end.

Microsoft's Azure cloud business crossed $100 billion in annual revenue for the first time, with commercial remaining performance obligations reaching $678 billion, up 84%, giving the company multi-year revenue visibility as it heads into fiscal 2027. Azure grew 43% year over year in the fourth quarter, and management guided to roughly 45% growth in constant currency for the first quarter of fiscal 2027, while Microsoft 365 Copilot passed 30 million paid seats and GitHub Copilot revenue accelerated over 60% quarter over quarter. The bull case is tempered by a capital expenditure cycle that saw full-year capex balloon to $115.95 billion, up 79.62% year over year, with calendar 2026 capex expectations translating to roughly $175 billion and fiscal 2027 capex set to grow again. Free cash flow fell to $66.99 billion for fiscal 2026, down 6.46%, with fourth-quarter free cash flow dropping 23.2%, and cash and equivalents fell 30.78% to $20.94 billion. Microsoft trades at $493.78 against a consensus analyst target of $572.92, implying roughly 16% upside, with a forward P/E of 25 and a rating mix of 52 buy-equivalent calls versus 3 holds and no sells, while the stock is up 2.75% year to date and down 2.08% over the past year, trailing the S&P 500's 11.7% year-to-date return.