General Electric Co. (GE) rallied to an 8-month high in the first hour of Tuesday’s U.S. session following an Oppenheimer upgrade. The stock has risen more than 70% so far in the fourth quarter, underpinned by growing optimism the four-year downtrend has finally come to an end. The former icon of innovation fell an astounding 82% from the 2016 high into May 2020’s 29-year low, and more than 92% since posting an all-time high in August 2000.
GE Paying Off Old Debts
The company is working off an enormous debt load after years of bad management. The crash in bond yields is making the job easier, along with key personnel changes designed to end a near-comatose corporate culture. Unfortunately, bad timing is playing a role in GE’s recovery because the aviation division is posting huge losses due to the collapse in air travel and MAX-737 grounding. Fortunately, that crisis will ease as we get closer to wide-scale vaccine distribution.
Oppenheimer analyst Christopher Glynn upgraded General Electric from ‘Market Perform’ to ‘Outperform’, setting a price target of $12 while noting the “rating reflects our view of more pointed read-through of cost reduction initiatives, resulting in early stages of clearer breadth of operating momentum across segments. We believe working capital performance could surprise to the upside in 2021, considering GE is working through widespread facility consolidations and managing working capital amidst that during 2020”.
Wall Street And Technical Outlook
Wall Street is finally jumping on board the bull train, with a ‘Moderate Buy’ rating based upon 8 ‘Buy’ and 5 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $5 to a Street-high $12 while the stock is trading about $1.30 below the high target. This placement makes sense because this is a long-term recovery play rather than a short-term trading vehicle.
General Electric undercut the 2018 low at 6.40 during the pandemic decline, reversing after trading just below the 2008 low at 5.51. The uptick that started in the fourth quarter has established a ‘2B’ buy signal while continued upside that reaches or exceeds the February 2020 high at 13.26 will confirm a bullish double bottom reversal. That level has come into narrow alignment with the 200-week EMA, with a breakout establishing the first uptrend since 2016.
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Disclosure: the author held no positions in aforementioned securities at the time of publication.