Analysts at J.P. Morgan (NYSE:JPM) are not giving General Electric (NYSE:GE) and chance to prove its turnaround will work. Analyst Stephen Tusa posted yet another bearish note on GE, lowering his $10 price target to $6 on GE stock.
Tusa set a $6.00 price target on GE. He reasoned that cash flow and EBITDA are down by too much in the last report and that liquidity concerns will hurt the stock. The dividend cut, which improves cash flows, is not enough. Combining weakening fundamentals, the analyst derives $0 in cash flow by 2020.
This analysis is very harsh and probably too excessive. GE just hired a new CEO with a proven track record and a specialty in consolidating acquired businesses in the healthcare space. The GE management team will need to deliver a concise turnaround plan and progress report to shareholders to allay fears. GE stock could head lower as tax-loss selling starts.
Tusa has a good track record on GE stock. His call runs contrary to other analysts, who collectively have an average price target of ~ $13.
Buying GE on its way down could prove wrong and is ultimately a bet against committed, talented GE staff. The firm has unknown liabilities and losses ahead yet much of the known losses were already announced.
GE stock is a speculation that is among the most risky. And that harsh downgrade may have created a buying opportunity. Time will tell.
