Top GE Analyst Downgrades GE Value, Drives Shares Down

JPMorgan’s Stephen Tusa is the most prominent General Electric stock analyst on Wall Street and he has opened the week with a bearish rating.  In a client note, he argues that many investors are “underestimating the severity of the challenges and underlying risks at GE, while overestimating the value of small positives.” 

In relation to this, then, Tusa noted that GE stock is up 38 percent on the year but that is not consistent with cuts of at least 50 percent, so far. And upon this announcement, GE’s stock has already sunk upwards of 6 percent in pre-market trading on Monday, to south of $10 a share. His criticism, which seems consistent with his typical GE rating, whereas Wall Street continues to “significantly over project” how the free cash flow will bounce in the near future. 

As a matter of fact, in his note to clients, Tusa said, “We believe many investors are underestimating the severity of the challenges and underlying risks at GE, while overestimating the value of small positives, and with a 38 percent move in the stock year to date, and more than 50 percent cuts to forward fundamental free cash flow anchors, we are cutting [our price target]” and advising to underweight. 

However, Tusa is not alone this time. His bearish stance on this stock has bumped 55 percent since December on hopes that new CEO Larry Culp will stabilize the somewhat volatile business this year, in time for a full recovery by 2020. 

This is important, of course, because General Electric was one the biggest public company in the United States. Unfortunately, the American industrial company has downshifted from losses of $200 billion in market value in just the past two years. This struggle, though, comes as the result of unraveling several years of acquisitions with CEOs Jeffrey Immelt and Jack Welch at the helm. 

As such, Culp said in a press release, “We have work to do in 2019, but we expect 2020 and 2021 performance to be significantly better.” And so far, stakeholders have been mostly happy with how Culp has managed the firm, though some are wary from his announcement that the company could burn through $2 billion more in liquidity than they will make this year.

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