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General Electric Stock Is Still Poised for a Comeback

support@smarteranalyst.com (Ben Mahaney)

Is General Electric (GE) stock prepping for a comeback?

It certainly can happen. While the industrial giant was once the most valuable company in the world, its stock has plummeted as restructuring efforts are fast underway. So while it was once inconceivable to realize tremendous gains from the stock — it was, after all, an extremely mature company — some say it’s looking more possible to view GE as a growth stock. While the company still expects negative cash flow for the year, investors are exceedingly optimistic that GE is doing the necessary steps to turn things around.

Nigel Coe, analyst at Wolfe Research, is a believer, as he reiterates his Outperform rating and $15 price target on the stock, which implies nearly 35% upside from current levels. (To watch Coe's track record, click here)

Commenting after CEO Larry Culp discussed GE at the EPG conference last week, Coe’s impression was that Culp would want to dive into the pool and leave as few ripples as possible. The analyst says that is “basically what happened,” as the company did not change guidance as 2019 is “tracking as planned…”

Though optimistic, Culp made it clear that the prognosis is for a multi-year transformation, and not an overnight fix. But nevertheless, Coe says there were “plenty of encouraging comments” relating to “the slow and steady process of lean implementation and transformation across the organization, re-orientating GE towards the customer, reducing organizational complexity, decentralizing decision making and driving cost reduction.”

Coe doesn’t see “too many” investors who expect the stock to fall back to 2018 lows, but he admits he gets “pushback” on his 2019 year-end price target of $15. While his detractors argue that the recovery “is too slow,” Coe is “of the view that $10-11 is a decent anchor point for now,” while expecting “aggressive balance sheet de-levering by [the end of 2019, to serve] as a powerful catalyst” for the stock.

All in all, many investors are bullish on GE stock because of CEO Larry Culp. The new boss has increased transparency greatly, which has served as a boon for the stock. And while the company is still not out of the woods quite yet, Wall Street is confidently leaning on Culp to continue leading GE as well as he has been doing since he took the position at the end of 2018. 

Wall Street sizes up GE as a ‘Moderate Buy’ stock, as the bulls edge out the cautious on the industrial giant. In the last 3 months, GE has received 7 bullish ratings versus 6 analysts hedging their bets, and 2 bears who doubts the company can secure a turnaround. Although GE shares have risen as much as 30 year-to-date, the consensus price target of $11.18 hints there could be upside for investors, with the stock fetching $9.50.

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