Barclays Says It's Time To Reconsider General Electric's Stock

It’s been a year to forget for General Electric Company GE investors, but one Wall Street analyst say the phoenix may soon rise from the ashes.

The Analyst

Barclays analyst Julian Mitchell upgraded GE from Equal-Weight to Overweight and reiterated his price target of $16.

The Thesis

Even GE skeptics may want to reconsider the stock following the company’s recent CEO change, according to Mitchell. He says GE will likely fall well short of 2018 guidance but investors are braced for EPS of 75 cents, free cash flow of 50 cents and an additional 75 percent dividend cut.

Mitchell says new GE CEO Larry Culp will likely announce updates to the long-term strategic plan in the near future, and downside guidance revisions are likely coming to an end.

Once the company’s industrial net debt of $4 to $5 per share is factored out, Barclays estimates GE’s Aviation and Healthcare units alone are worth the stock’s current enterprise value. In other words, investors who buy GE now are getting its Power, Renewables, Lighting, Transportation and oil & gas businesses “for free,” Mitchell wrote.

It wouldn’t be surprising to see the new management team reassess GE’s restructuring plan.

“We think the upside potential in the shares is considerable now that an outside CEO has been put in place, which substantially increases the range of possibilities that could be pursued at GE, in terms of both the pace of the restructuring as well as broader strategic options (we are not convinced that management / the Board will feel compelled to stick to the June 2018 strategic plan),” Mitchell said.

Price Action

GE's stock was trading higher by 1.5 percent to $13.40 at time of publication.

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