How GE could stop its shares from sliding
Sources tell FOX Business' Charlie Gasparino that General Electric is looking to sell upwards of $20B in assets, including the transportation business in Chicago.
General Electric’s (NYSE:GE) stock has taken a big hit, dropping more than 50% over the past 12 months. And year-to-date, GE’s shares have declined 16%.
Company shares are trading at multi-year lows at the same time that the major U.S. stock indexes are trading near record highs, boosted by a strong economy and optimism the current administration’s pro-growth policies will spur further value creation.
In a research note discussing the industrial conglomerate’s challenges and future, Melius Research said, “The best pushback we get on buying GE is that there is a lack of tangible catalysts, lack of visibility, and the reality that other industrial peers are riding the upcycle wave while GE struggles to find a bottom.”
Melius also noted that small catalysts could move GE’s stock in a big way. For investors interested in predicting a possible turnaround in GE’s share price, they could look for one of the following to happen: The appointment of a high-profile board member; an early spin-off announcement; a higher cost-out; or a plan for the power business.
Melius said they “would buy the stock today,” acknowledging that they have said that before and have been terribly wrong. Still, they stand by their call.
“If GE can fix its problems the upside is way more than any other story that we cover,” Melius said.
This week, GE squashed rumors that it was looking at selling its interest in Baker Hughes (NYSE:BHI) ahead of the 2019 lockup expiration, a change in tune from the company’s November call during which it said it would explore selling the stake before the restrictions lift.
While GE has pledged to sell billions worth of assets as part of its turnaround program, Melius said it doesn’t think GE should consider a sale of Baker Hughes right now. Scott Davis told FOX Business the simple reason behind this is that “Baker Hughes’ stock is so cheap.”
In fact, in mid-February, Melius provided research noted that said the math suggests that rather than sell its stake in Baker Hughes, GE should buy the remaining 37.5% stake, which could yield an extra $2.20 a share of value.
Melius has a $27 target on GE’s stock