UBS Sees 60% Upside For GE Stock

General Electric Company GE investors received some much-needed good news Monday when one Wall Street analyst said the battered stock is an excellent long-term buy.

The Analyst

UBS analyst Steven Winoker reiterated a Buy rating on GE with a $13 price target.

The Thesis

The critical issue for GE moving forward is the company’s debt and leverage, Winoker said in the note. (See his track record here.) 

A strategy of asset sales, industrial free cash flow stability and rolling forward pension and operating leases could get GE’s leverage down to about three times in two years’ time and two times by 2022, the analyst said. 

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 said he 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. 

The GE recovery process will likely be slow and volatile, but the company has plenty of additional levers to pull to improve its financial situation and provide strong returns for investors over time, Winoker said. The company’s financial flexibility has not been reflected in the stock’s 34.2-percent decline in the past month, he said. 

“While GE has been under considerable pressure lately, we maintain our conviction that the stock presents a long-term capital appreciation opportunity." 

Price Action

GE shares were down 1.81 percent at $7.88 at the time of publication Monday. 

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