GE stock is in a bullish pattern of higher highs and higher lows, says Argus analyst John Eade.
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General Electric stock is in a bullish pattern of higher highs and higher lows, says Argus Research analyst John Eade. Thursday, he raised his price target to $14 a share, matching the Street-high target price.
Eade believes the turnaround under GE (ticker: GE) CEO Larry Culp is making progress, which is evident despite a brutal year plagued by Covid-19. “While the company’s Healthcare segment is experiencing a surge in orders for Covid-19-related products, other businesses are languishing, especially Aviation,” writes the analyst in a Thursday research note, adding, “We think the company has the cash it needs to survive the crisis, and an able manager to lead it on the other side.”
Culp has been focused on cutting costs through the pandemic and paying down debt. Earnings are low in 2020 at about an expected six cents a share. But Eade sees $1.50 in earnings power down the road. “If we apply an industry-average multiple to this estimate, the valuation is close to $25 per share,” says Eade. “That’s a long way off. In the meantime, we think that GE’s progress under its new CEO will lead to higher earnings and higher multiples.”
On balance, his peers agree. About 70% of analysts covering the stock rate shares Buy. The average Buy-rating ratio for stocks in the Dow Jones Industrial Average is about 58%.
The average analyst price target for GE stock is about $11.50, right where shares are trading after GE’s recent rally. The stock is up about 90% over the past three months, far better than the comparable 10% gain of the S&P 500. Melius Research’s Scott Davis is the other analyst with a $14 price target for shares.
Gordon Haskett analyst John Inch has $7 price target and a Hold rating on GE stock. He still believes there is a chance GE could issue more stock—adding to its cash balances to weather recent storms.
On Wednesday, GE agreed to pay $200 million to settle an investigation by the Securities and Exchange Commission into accounting practices relating to its insurance and power-generation businesses. “We believe the SEC settlement now clears a path for GE to issue equity capital to shore up its financial position,” wrote Inch in a Thursday research report.
The company might not have wanted to offer stock before settling with the SEC, as it was possible the agency would required GE to restate prior financial results. That would have been a negative for the stock. No restatement was required.
GE has said in the recent past it has no plans to raise money by selling stock. Investors will have a chance to ask again in January, when the company reports fourth-quarter numbers.
GE stock was down 0.4% in midday trading Thursday, at $11.35. The S&P 500 was down 0.1%.
Write to Al Root at [email protected]
