2020 May Be Another Lost Year For General Electric, But BofA Is Still Bullish

It’s been another difficult year for General Electric Company GE investors, with the stock down another 40.7% year to date to under $7.

One Wall Street analyst said GE’s 2020 sell-off is a buying opportunity for long-term investors, but they should keep their near-term free cash flow expectations in check.

The GE Analyst

Bank of America analyst Andrew Obin reiterated his Buy rating and $11 price target for GE stock.

The GE Thesis

GE and its investors started off the year with relatively high hopes for FCF. At an investor conference this week, GE CEO Larry Culp suggested the economic downturn will likely make 2020 another negative FCF year for GE.

GE is now projecting negative industrial FCF of between $3.5 billion and $4.5 billion in the second quarter alone.

Looking ahead, Obin said he anticipates a slow pace of recovery for GE’s aviation business. However, he projects a stronger rebound in GE’s health care business given orders for products diagnosing and treating COVID-19 more than doubled in the second quarter. Meanwhile, supply chain issues impacting GE’s power and renewables segment are improving, and the company is on track to ship at least 45 heavy-duty gas turbines in 2020.

While the downturn has been a bump in the road for GE, Obin said he believes GE should be able to weather the storm.

“We see GE having the financial flexibility to weather near-term revenue declines and continue its turn-around progress,” he wrote in a Friday note.

Benzinga’s Take

It seems GE’s financial situation is far better than it has been in recent years, and the company’s balance sheet is stable and flexible enough to endure yet another difficult year. However, GE investors are likely growing tired of hearing about how a turnaround is just around the corner after years of underperformance and lackluster FCF and earnings numbers.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

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