NEW YORK • General Electric Co (GE) fell in pre-market trading yesterday after a key analyst at JPMorgan Chase & Co returned to a bearish view on the stock, reversing a December upgrade that had provided a major boost to positive sentiment.
Steve Tusa downgraded the shares to ‘Underweight’ from ‘Neutral’ and trimmed his price target by US$1 (RM4.1) to a Street-low view of US$5, a level that suggests shares of the industrial conglomerate could lose half their value from their closing price last Friday. Shares were down 5.4% before the bell.
“Investors are underestimating the severity of the challenges and underlying risks at GE, while overestimating the value of small positives,” Tusa wrote, noting a recent advance in the stock. “The Street is significantly over-projecting the bounce in (free cashflow) in the coming years, off levels that we calculate at zero currently.”
GE shares have climbed 55% off a December low, although that follows a multi-year period of weakness. The one-time largest stock on Wall Street has lost more than 80% of its value from record levels hit in 2000.
JPMorgan was bearish about a number of GE divisions. It wrote that GE’s power and renewables business would remain “weak”, that fundamentals in the aviation division are “weaker than meet the eye”, and that GE Capital Services “will likely consume material cash for the foreseeable future”.
Currently, 10 firms have ‘Buy’ ratings on GE, while nine recommend holding it and three have the equivalent of ‘Sell’ ratings. The average price target is US$11. — Bloomberg