Things Are Going From Bad To Worse For GE

Even with General Electric Company GE's stock down more than 74 percent in the past three years, Wall Street analysts are still saying investors should still think twice about buying the dip.

Credit Suisse analyst John Walsh on Monday reiterated his Neutral rating and lowered his price target from $12 to $10. The risk-reward balance for GE stock has still not normalized.

“Poor visibility into fundamentals (e.g., Power and forward Aviation margin) coupled with uncertainty around liabilities (e.g., insurance, Capital, WMC, and SEC investigation) keep us sidelined,” Walsh wrote.

Concerns Remain

While he says upside-to-downside risk is currently 2-to-1, there are still four main concerns with GE stock that keep him from being bullish:

  • Unknown liability size.
  • Persistent Power weakness.
  • Unstable aviation margins.
  • Lackluster cash flow.

Walsh said GE’s core business is not necessarily fundamentally broken, but there's no end in sight to GE’s issues, at least in the near term. At this point, there’s no way to accurately predict what GE’s financials will look like once new CEO Larry Culp’s restructuring plan is implemented.

Culp said on Monday he feels a sense of “urgency” to get GE back on track and that the company has “plenty of opportunities through asset sales” to dial down its leverage.

Walsh isn't the only expert that is still skeptical of GE. On Friday, JPMorgan analyst Stephen Tusa sut his price target for GE stock to just $6.

"While the stock is down ~70% from the peak of $30, this move still does not sufficiently reflect the fundamental facts," he wrote.

No Technical Support

While GE's fundamentals are a mess, Miller Tabak analyst Matt Maley said on Friday GE stock is unlikely to get any technical support in the near term either.

"Even though the stock is very oversold on a very near-term basis, if you look at its weekly [relative strength index chart], it’s not as oversold as it was on two other occasions in the last 12 months. So I think it’s a risk-reward situation, and I think it’s got to go lower before you want to buy it," Maley said. He has a $6.66 target for the stock.

GE stock fell more than 7 percent Monday morning to under $8 per share for the first time since March 2009.

At time of publication, shares traded down 5.4 percent at $8.12.

Related Links:

Putting GE's Horrible 3-Week Run Into Perspective

Barclays Says It's Time To Reconsider General Electric's Stock

Photo credit: Empoor, via Wikimedia Commons

Posted In: Credit SuisseJohns WalshJPMorganMatt MaleyMiller TabakStephen TusaAnalyst ColorPrice TargetTop StoriesAnalyst RatingsMoversTrading Ideas