JP Morgan Analyst Goes All Bearish on General Electric (GE)

JP Morgan analyst pulls price target, underestimates GE’s long-term growth.

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J.P. Morgan analyst Stephen Tusa has been one of the biggest critics on General Electric (GE) for the past few years now. Many of his predictions regarding GE have turned out to be correct. He anticipated GE’s bearish moves, repeatedly highlighting the bank’s client to sell GE stock. With his predictions coming true, Tusa has gained massive recognition among the investors, and since then the stock has observed massive swings in its shares price.

Last Monday, GE fell 4% after Tusa’s notes went viral. However, the stock pushed back on Tuesday following Tusa’s anticipated $5 mark. Throughout the past week, the stock has been trading above $6 breaking the anticipated price target of J.P. Morgan’s analyst.

Tusa said that General Electric’s equity might be worthless. Is it so? At the start of this year, GE looked in positive momentum. Despite the sale of GE’s highly profitable biopharma unit in March, the industrial conglomerate’s initial guidance for 2020 called for low-single-digit organic revenue growth, modest margin expansion, and ranging from $2 billion to $4 billion of industrial free cash flow. In February, GE was trading at a 52-week high of $13.2, which was approximately double to GE’s price at the later end of 2018.

The COVID-19 has bamboozled the results of General Electric in 2020. The pandemic impact has undermined power demand, with almost every business dropping to its lowest this year. The aviation sectors have been hurt badly, which is usually GE’s leading sector with the largest cash flow. GE’S aviation revenues have plunged by 44% during the last quarter compared to the prior year period.

This year was supposed to put GE in a better state after a disappointing period in 2018. Rather it got worse, as the second quarter revenues dropped by 38.4%, missing the consensus estimate by almost $280 million.

Tusa had a reason to be going against GE stock with the circumstances it has faced in the past and especially the ongoing pandemic impact. Tusa has warned the investors that they may be underestimating the near-term headwinds facing the company. Moreover, GE’s lack of guidance for the past quarter has made Tusa issue a sign of warning.

General Electric (GE) may take years in recovering its cash flow due to the ongoing impact of COVID-19. Tusa believes that GE’s earnings power may not return to normal until 2024. The free cash flow may take 2 to 3 years before it returns to normal, added J.P. Morgan analyst.

According to one of the sources, which highlighted that Vulcan Value Partners is bullish on General Electric (GE) stock. The investment firm is betting on GE’s strong liquidity position and an attractive set of assets. This seems to be interesting as the investment firm is going against the predictions of Tusa.

Market Overview

General Electric (GE) closed the trading session on Sept. 4 at $6.42, ahead of Tusa’s anticipated price mark. The stock closed the day on a high with +1.58%.

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