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GE Stock’s Rally Won’t Last, Analyst Says From Barron's General Electric (GE) stock is trading down Friday, and one analyst thinks it has farther to fall. Where we were: General Electric didn’t have a great 2018, but the shares were enjoying a small revival in the new year. Where we’re headed: GE could fall back down toward $7, from nearly $9 currently, if the research firm Gordon Haskett is right. General Electric may have problems, but at least it knows how to make an exit. The embattled industrial company was removed from the Dow Jones Industrial Average in mid-2018, meaning that it was spared the dubious prize of being the worst performer in the index for two straight years. If it hadn’t, the shares’ more than 50% tumble in 2018 would have easily secured that spot.Goldman Sachs (GE) took the booby prize instead. Yet in 2019, GE got some new legs, and was enjoying a short bull- market runin the first few trading days of the year. Don’t expect it to last, says Gordon Haskett. Analyst John Inch reiterated an Underperform rating on GE Friday and slashed his price target by $3, to $7. The move comes as Inch adjusted his earnings-per-share forecast lower for both this year and next. In 2019, he now sees GE earning 85 cents a share, down from 93 cents, a figure that he expects to fall to 36 cents by 2020, four cents lower than his previous forecast. GE didn’t immediately respond to a request for comment. By 2020, Inch estimates that GE will have sold off all of its stake in Baker Hughes (BHGE), as well as other businesses it’s scheduled to divest, and GE Health Care will also be gone. “[T]he the bulk of our 2020 estimate change is driven by lower assumed Aerospace results (driven by mix and a slower global economy) and lower assumed Capital profits,” Inch wrote. He argues that the $7 price target also dovetails with his sum-of-the-parts analysis for GE, but warns that framework doesn’t include “off-balance sheet liabilities that could ultimately equate [to] tens of billions” of dollars. He writes that GE also looks “extremely challenged” on a cash-flow basis, which could put its worth closer to $5 a share. It’s not too surprising that Inch is skeptical of GE at the moment: He has long been a critic of the company, and the stock’s recent run has been a cause for speculation about whether or not 2019 will be the year GE finally regains some footing. His continued pessimism separates him from other longtime bears such as JPMorgan’s Stephen Tusa, who finally threw in the towel on GEin December, upgrading the stock to Neutral. GE was down 1.8% to $8.78 in Friday morning trading. |
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