UBS Still Bullish On GE

The downfall of General Electric Company GE has continued in this month, but one analyst says GE stock has finally become a value for long-term investors.

The Analyst

UBS analyst Steven Winoker has reiterated his Buy rating and 12-month $13 price target for GE.

The Thesis

The primary concern related to GE among investors is the company’s leverage, and Winoker said he agrees. However, he said GE has plenty of levers to pull in coming years to reduce its leverage down to a reasonable level, which should create upside for the battered stock.

Winoker said GE should realistically be able to lower its leverage to about three times net debt by 2020 and about two times net debt by 2022.

He said there’s no way to predict every possible scenario for GE, but UBS projections assume GE will successfully divest its remaining stake in Baker Hughes A GE Co BHGE in 2019 and GE Healthcare in 2020, with 80 percent of the spin-off retained by GE shareholders. Winoker expects the health care spin-off will take on $18 billion in gross debt. Finally, GE’s Industrial segments will have to shoulder the cash flow burden of paying GE Capital’s upcoming near-term debt obligations, he said.

“From our interactions with management, it's clear that they are evaluating all scenarios, and the top priorities are mitigating risk in GE Capital, reducing overall leverage, and improving operational performance,” Winoker wrote.

Price Action

GE's stock traded down by another 2 percent to $6.87 Monday and is now down 77.6 percent overall in the past three years.

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Photo credit: Momoneymoproblemz, via Wikimedia Commons

Posted In: Steven WinokerUBSAnalyst ColorReiterationAnalyst Ratings