General Electric Co. (NYSE:GE) may be the most hated stock in today’s market. GE stock has had quite a bad time of it. The shares are down 15% for 2018 and 50% over the last year. The last of the original Dow stocks is holding its breath, waiting for its de-listing and replacement by something hotter.
Amazon.com Inc. (NASDAQ:AMZN) and Alphabet Inc. (NASDAQ:GOOGL) have yet to be invited, among others.
GE is moving to sell part of its lightbulb business (it was created by a merger with Thomas Edison’s electric company in the 19th century), and vultures are circling Baker Hughes, A GE Co(NYSE:BHGE), which with $60 per barrel oil is suddenly the star of its show.
The fourth quarter report on GE stock didn’t set hearts a-flutter, either. As our Bret Kenwell writes , there may still be a long way to fall.
Looking for Green Shoots
At this point in a company’s fall from grace, analysts trot out two clichés. You don’t want to get in front of a falling knife and even a dead cat will bounce if you drop it from high enough. In other words, don’t get in front of the fall, but you can trade a stock after it has fallen.
So even while Citigroup Inc (NYSE:C) was selling its own stock during the fourth quarter of last year, it was buying GE stock. The state of Tennessee bought GE even while it was dumping shares of Gilead Sciences, Inc. (NASDAQ:GILD) and AT&T Inc. (NYSE:T).
Our Ian Bezek is also turning bullish on GE stock. He thinks the parts may be worth more than the whole, and that a breakup may be coming.
Meanwhile, GE had a nice commercial debut during the Winter Olympics.
Investor Stay Away?
All these moves, however, seem speculative, people taking a flyer on the old girl because the stock is below $15 per share, trading at less than 14 times last year’s anemic earnings, the market cap now just $10 billion more than last year’s sales of $113 billion.
Investors are being told GE stock is a no-go zone. Sales trends are weak. GE’s core businesses are mature. Management hasn’t been able to find competitive advantage.
Or have they?
GE dominates in jet engines. GE wind power is getting to be as cheap as coal. GE Health is killing it in big machines like CT scanners. The problem is that former CEO Jeff Immelt doubled-down on big turbines at a time when the cheapest renewable energy, efficiency, was reducing demand for them, and on big trains as excitement turned to electric cars.
Take out Alstom, the French turbine company Immelt bought in 2015, and the rest of the company is not terrible. The problem is that Alstom has to be written down, and a lot of people have to be laid off in a country where even talk of layoffs is anathema.
The Bottom Line on GE Stock
Take out Alstom’s roughly $3 billion in sales, along with its problems, and you have a pretty profitable company, in some growing niches, with cash on the books.
Outside power, transportation and lighting GE is still growing, and Bezek is right that a sum of the parts calculation would draw a much higher valuation than the market now offers.
The problem is no one believes GE management, even CEO John Flannery, whose old healthcare unit earned $3.161 billion on revenue of $18.291 billion during 2018. Without that belief, the stock can’t rise.
If it returns, however, watch out.
Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AMZN and T.
