General Electric Company (NYSE: GE) is off to a hot start to 2020, and the stock won over another long-time bear on Friday.
The GE Analyst
Gordon Haskett analyst John Inch upgraded GE from Underperform to Hold and raised his price target from $7 to $11.
The GE Thesis
Inch said GE appears to be well-positioned to meet or exceed its 2020 guidance.
“Our upgrade is also anchored in GE having successfully repositioned into a high-level ‘beat and raise’ story, based on GE’s own guidance/inputs, that seems likely to continue throughout 2020,” Inch wrote in a note.
Inch said he’s not particularly inspired by GE’s business, but it has significantly dialed back its risk compared to several quarters ago. He said the worst appears to be over for the company’s struggling Power business, at least for the next one to two years. In addition, the company’s Healthcare segment has plenty of room for improvement.
GE is seemingly no longer in a near-term cash crunch, and Inch said future 737 Max cash inflow should help support the Aviation segment over the next couple of years.
Inch said once GE completes the sale of its BioPharma business and its remaining stake in Baker Hughes Co (NYSE: BKR) and uses those proceeds to pay down debt, investors can once again focus on the company’s core business and valuation.
While Inch said GE shares no longer present the risk they once did, a number of risks remain, including outsized debt, accounting issues, and weak earnings quality.
The fact that GE bears are throwing in their towel on their negative outlook is another indication that GE’s restructuring plan is moving in the right direction. However, the company still has a long way to go to prove the new GE will be able to drive long-term earnings growth and returns for investors.
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