A Gas Turbine Issue Turns A General Electric Bear Even Grizzlier

General Electric Company GE shares have lost roughly a quarter of their value year-to-date, even as the company is embarking on a multiyear transformation plan to turnaround operations and refocus on core industrial businesses.

An analyst with the lowest price target on the sell-side lowered it even further Thursday.

The Analyst

JPMorgan analyst Stephen Tusa maintained an Underweight rating on GE and lowered the price target from $11 to $10.

The Thesis

The impact on asset value from a failure with a GE gas turbine product is a negative development for a company that has "little wriggle room," Tusa said in the downgrade note. (See the analyst's track record here.)

Citing company officials and the customer, the analyst said the company has experienced a failure in a first-stage blade on a H-frame in one of its two initial marquee installations in the Colorado Bend.

Despite the company downplaying the issue as an "oxidation issue," Tusa said the problem is material enough for the customer, Exelon Corporation EXC, to have a plant shutdown.

GE Power has company-specific issues around the H-frame technology and potentially the profitability of the related future services stream, some of which sits on GE's balance sheet of $9 billion in contract assets, according to JPMorgan.