The Case for Holding -- Not Selling -- GE's Healthcare Stock -- Barrons.com
A healthcare giant has been born: General Electric completed the spinoff of its healthcare business, GE HealthCare Technologies, on Wednesday, with the shares trading on the Nasdaq under the ticker GEHC.
GE investors face a choice: keep shares in the healthcare business they received in the spinoff, or cash out. GE HealthCare shares closed at $60.49 on Wednesday, up about 8%, and GE traded at $70.20, off about 17%. GE shareholders got one share of GE HealthCare for every three GE shares held, meaning that roughly $20 a share in GE stock value is now represented by GE HealthCare shares. Putting GE HealthCare back into GE gets investors $90.36 for the value of all GE investments. GE shares closed at $84.98 on Tuesday, so investors' total stake in GE investments rose about 6% on Wednesday -- not bad.
With 455 million shares outstanding, GE HealthCare has a market cap of $25.5 billion. Net debt is about $8.4 billion, giving it a total enterprise value of almost $34 billion, roughly 10 times expected 2022 earnings before interest, taxes, depreciation, and amortization, or Ebitda. Siemens Healthineers, a GE HealthCare peer, trades for about 16 times estimated 2022 Ebitda. That's a big enough discount to hold on to GE HealthCare stock.
Barron's has argued that the breakup of GE into three business -- healthcare, power generation, and aerospace -- would create shareholder value. But that doesn't mean GE HealthCare stock will quickly rise. Investors have to get to know the business. And healthcare analysts -- not GE's usual industrial analysts -- will be launching coverage in the next few weeks. Be patient.
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Taking Stock of Jobs
Another short holiday week that began the way 2022 ended: with declines. Tesla stock plunged over 12% as the EV maker set a record for deliveries but missed expectations. Apple also slid; its market value is now more than $1 trillion below its peak. Federal Reserve minutes from December showed no signs that the central bank is considering easing. Amazon.com and Salesforce announced big job cuts, but ADP and nonfarm jobs data both beat expectations, though wage growth slowed. Stocks rallied to finish the week, with the Dow industrials up 1.46%, to 33,630.61; the S&P 500 up 1.45%, to 3895.08; and the Nasdaq Composite rising 0.98%, to 10569.29.
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Annals of Deal Making
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January 06, 2023 20:13 ET (01:13 GMT)
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