The shares of General Electric Co. they made another dive on Thursday, putting them on track to suffer the biggest decline in more than 11 months, as analysts did a mixed review of the Analyst Day and GECAS agreement of the industrial conglomerate.
The GE action,
fell 8.8% in afternoon trading, which would be the biggest in a day since it fell 11.3% on April 1, after falling 5.4% on Wednesday as a result of the announcement of the deal and the analysts ’event.
Since shares closed at a three-year high of $ 13.60 on March 8, it has now fallen 14.6% amid a three-day losing streak.
The expanded sale of the stock comes after GE announced a $ 30 billion deal to combine its aircraft rental business (GECAS) with AerCap Holdings NV AER,
and surprisingly proposed a reverse division of 1 by 8. The company also said that what was left of its GE Capital business, following the GECAS agreement, would be incorporated into GE Industrial and provided up-to-date financial guidance on your Analyst Day event. Read more about GE’s moves on Wednesday.
Deutsche Bank analyst Nicole DeBlase raised its stock price target to $ 14 from $ 13, amid an improved outlook for free cash flow (FCF) in 2022 and 2023 to match management guidelines. He reiterated the retention rating he had in the market for at least the past two years, citing the lack of a rise in his price target.
While DeBlase “didn’t find many surprises” in GE’s outlook for this year, he believes “positioning / expectations were an important component” of the stock’s subsequent trading performance.
GE has been a consensus for many months among hedge funds for several months and remains a preferred way to expose itself to the “reopening” trade, given the importance of the aviation business to both. [earnings per share] and FCF, ”DeBlase wrote in a note to clients.
After a record quarterly rise of 73.4% in the fourth quarter, DeBlase said the shares had been the best performance among its peer group this year, “so we don’t think expectations can qualify as downs for the event “.
Aside from the assessment, he said he heard some “not-so-positive” comments, including questions about the timing of the GECAS agreement, given that it occurred during the cycle period, and that the agreement was a “clever” way to write down GECAS assets. .
FactSet, MarketWatch
Oppenheimer analyst Christopher Glynn said the agreement and guidelines place GE on a “solid” footing as it improves capital efficiency and is in the midst of expectations that a “solid” recovery “in aviation.
But Glynn also expressed concern about the valuation, as it cut GE’s rating to achieve it, having surpassed it since November, while eliminating its price target. He said his rebate was based on the valuation, as the shares had exceeded the previous target price of $ 13.
Glynn wrote that “substantial change execution and a cyclical recovery” is already “set at current levels,” but said the extended duration of the debt structure and strong liquidity now allow GE a “backdrop. fund to emerge from the aviation recession in a position of resistance “.
Meanwhile, JP Morgan bear and skeptic Stephen Tusa reiterated GE’s neutral rating over the past year, but said he still saw a “material downside” to the shares, according to its $ 5 target price. which is 59% below current levels.
Tusa said that while he agrees that a simplified GE after the GECAS deal is positive, he said the deal and the financial outlook have just “crystallized” for him the “real case. “of the shares.
Since GECAS no longer appears in the picture, Tusa said there are no longer any assets of GE Capital for Wall Street bulls to argue that there is enough value / equity to support the related debt.
“In short, with the free money of the [COVID-19] reserved for the vaccine trade, GE’s narrative as a spin-off that gains strength with a cash V-shape and revenue lies in numbers that show sustainable leverage well above targets despite [more than] $ 70 billion in stocks to cover the fundamentals we would define as combined with expectations about future earnings that remain too high, ”Tusa wrote.
However, UBS’s Markus Mittermaier was a little more lenient, as he reiterated the buy rating he had at GE since December 2019 and his $ 15 share price target, which implies a gain of $ 24. % with respect to the current levels.
He said that despite FCF’s short-term “successes”, the simplification following the GECAS agreement is “a clear strategic positive”. He said that in the very near term, he understands the “negative interpretation” of some of the elements of the agreement and the prospects, such as the success in 2021 FCF to further reduce the factoring balance, as well as the increase in the net debt of GE Capital’s incorporation into GE’s balance sheet.
That said, this has not eliminated the excess of future factoring developments, further jeopardizing the aggregate debt landscape that we believe will make investors increasingly willing to “subscribe” to the new emerging GE, which should d ‘help multiple “. Mittermaier wrote. “In general, we think [Wednesday] it was an important step toward creating a simpler GE, with fewer “legacy overhangs” and improved medium- and long-term strategic optionality. “
GE shares have risen 47.3% over the past twelve months, while the XLI-traded fund of the select industrial sector SPDR
has advanced 46.7% and the S&P 500 SPX index,
has risen by 44.0%.