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Shares of General Electric Co. rallied Monday toward a near two-year high after a longtime skeptical analyst, JPMorgan’s Stephen Tusa, handed off coverage to two colleagues who promptly raised the price target by 76%.
Analysts Seth Seifman and Mark Strouse assumed joint coverage of GE and reiterated the neutral rating that’s been on the stock for the past three years. But Seifman and Strouse raised the stock-price target to $88, which is just above current levels, from $50. The previous target implied about 43% downside from current levels.
The stock
GE,
climbed 1% in afternoon trading, putting it on track for the highest close since June 4, 2021.
It has soared 31% over the past three months and rocketed 82.8% since it closed at a 20-month low of $47.67 on July 14, 2022. The S&P 500
SPX,
has risen 7% since July 14.
GE is in the process of transforming from an industrial and financial conglomerate to splitting into three separate companies. GE HealthCare Technologies Inc.
GEHC,
separated from GE in January, while GE Verona, which combines GE’s renewable and power businesses, will be separated in early 2024, leaving GE to operate as GE Aerospace.
“During this transformation, GE has reduced debt and other liabilities substantially and where there is still work to do, the outlook is easier to understand,” Seifman and Strouse wrote in a note to clients.
While they see “an excellent business” in GE Aerospace and “potential” in GE Verona, they believe there is “limited upside” in the stock in the wake of its strong rally in recent months.
“Of the two remaining companies, Aerospace contributes the bulk of today’s value and we view the commercial engine business as a marquee franchise,” the analysts wrote. “GE Verona … is in the midst of a transformation that may yield a meaningful earnings ramp, with direct exposure to the energy transition and the Inflation Reduction Act (IRA), though proving this out is essential.”
GE’s stock may be getting a boost with Seifman and Strouse now covering the company, because Tusa was known as the first on Wall Street to call GE out on its liquidity and growth issues. While he backed away from his bearish stance in March 2020, his $50 stock-price target, prior to handing off coverage, was the lowest of the 22 analysts surveyed by FactSet.
Since Tusa upgraded GE to neutral three years ago, the stock has climbed 28.3%, while the Industrial Select Sector SPDR exchange-traded fund
XLI,
has gone up 40.3% and the S&P 500 has advanced 35%.
