JPMorgan Cuts Target On GE To $22: 'We Don't See The Future Growth Potential'

General Electric CompanyGE

JPMorgan's C. Stephen Tusa, Jr. maintains an Underweight rating on the Dow component's stock with a price target slashed from $27 to $22, saying the company's narrative is "as open and undefined as it's been in decades." Jeffrey Immelt's announcement in early June that he will be stepping down as CEO was "unexpectedly early" and Steve Bolze's decision to step down as head of GE Power signals the unit's "fundamentals are weaker than expected." In the meantime, GE is expected to post a "relatively weak" second quarter on rolling free cash flow that won't be enough to dispel related concerns and may result in operating cuts.

So Now What?

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Moving forward, GE's new management team led by its CEO John Flannery will need to control the narrative on four different fronts and set a new agenda regarding:

1. Earnings per share and free cash flow outlook.
2. Potential restructuring.
3. Capital allocation.
4. Portfolio priorities.

These four categories will measure GE's "true level of change" and set the narrative moving forward, the analyst added. Beyond these four messages, which should come in the bottom half of the year, the next important data point is the timing of share-based comp allocations including options pricing.