GE Stock Gets Price Target Boosted By Its Biggest Bear, But That Still Hints At “Big Down” Risk


Shares of General Electric Co. were little changed on Monday, thwarting the sell-off in the broader market, after the most bearish analyst raised his price target to 38%, but said the new target still called for a almost halving the price given concerns about “limited intrinsic value.”

The stock of the industrial conglomerate GE,
+ 0.13%
edged up 0.2% at midday, while the SPDR Industrial Select Sector XLI exchange-traded fund,
fell 0.6% and the S&P 500 SPX index,
slipped 1.4%. See Market Snapshot.

The stock has now climbed 5.4% since a one-for-eight share reverse took effect on August 2. Learn more about the GE Stock Split.

JP Morgan analyst Stephen Tusa raised his adjusted price target to $ 55, or about 48% below current levels, from $ 40. This target is still by far the lowest of the 20 analysts surveyed by FactSet. The second lowest target is Jeffrey Sprague’s $ 96 from Vertical Research Partners, while the average target is $ 122.94.

Tusa reiterated the neutral rating he had on GE since March 2020, writing in a note to clients: “Avoid GE given the high expectations and limited intrinsic value.”

“GE mis-selects almost all of the factors we measure given high expectations for increased EBITDA [earnings before interest, taxes, depreciation and amortization], according to the high multiple of the current year, while reducing the consensus (have come) for the third quarter, ”wrote Tusa.

The FactSet consensus for third quarter earnings per share is 47 cents, down from 48 cents per share in the same period a year ago. Since the start of the third quarter, the FactSet EPS consensus has fallen about 17.5%, to 57 cents, while the stock has slipped 1.5%.

Meanwhile, the FactSet EBITDA consensus for the third quarter is $ 1.84 billion, up from $ 1.01 billion a year ago and would be the highest total since the fourth quarter of 2019. Keep in mind mind that GE has missed the FactSet EBITDA consensus in 14 of the last 17 quarterly reports, according to FactSet.

Read also: GE stock surges after earnings beat, and surprise swings to positive free cash flow.

GE is expected to release its third quarter results on October 26, before the opening bell.

Tusa said if GE does not meet these high expectations, the planned deleveraging will fail, increasing the risks. After GE’s second quarter report, the company said it expects to achieve less than 2.5% leverage over the next several years.

“We see a significant downside as visibility improves on the aggressiveness of the consensus earnings curve or as the company executes a portfolio move, which has historically revealed much less underlying intrinsic value than the consensus doesn’t assume that, especially in the context of stubborn high leverage, ”Tusa wrote. .

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