General Electric Company (NYSE: GE) stock dropped nearly 8 percent on Friday to below $9 for the first time since 2009. The latest round of new lows come after GE received its lowest price target on Wall Street Friday morning.
J.P. Morgan analyst Stephen Tusa is the latest to slash his price target for GE stock. Tusa has reiterated his "underweight" rating and cut his target by 40 percent from $10 to $6. Tusa says there's no reason for GE earnings optimism in the near term.
"While liquidity is certainly debatable, we believe this is not really about liquidity, it's about a deterioration in run rate fundamentals," Tusa says.
[See: 9 Dividend Traps to Sell Now.]
In October, GE reported yet another quarter of disappointing earnings and cut its dividend by more than 90 percent to just 1 cent per quarter. The company said the dividend cut, its second in the past year, will allow GE to hold onto about $3.9 billion in much-needed cash as it attempts to navigate a difficult power market.
Tusa says that even after a 71 percent decline in the past three years, GE stock is still overpriced.
"Out of the eight reported segments, all of which were profitable even two years ago, six are now likely either at or below zero in 2020, with leverage actually up since that time," he says.
Investors have high hopes for new CEO Larry Culp's restructuring strategy, but Tusa says there seems to be little evidence that any of GE's restructuring initiatives have put the company on a better long-term trajectory.
According to CNN, Tusa's $6 price target is the lowest among the 18 Wall Street analysts who cover the GE stock, but he says even the $6 price target is based on "generous" 2020 projections and a sector average earnings multiple.
Tusa isn't the only analyst that is skeptical of GE stock in the near term. Bank of America analyst Andrew Obin says a GE turnaround will likely be a long, painful process.
"We think recent news flow on GE's weakening market share together with headlines on blade issues with new H-frame engine have significantly eroded investors' sentiment on GE Power's competitive position," Obin says.
"We think it might take some time for the new CEO Larry Culp to turn the long-cycle business around."
Bank of America has a "neutral" rating and $12 price target for GE stock.
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