Sometimes all it takes is someone believing in you, as evidenced by recent gains seen at General Electric (NYSE:GE). The beleaguered company has taken its share of lumps of late, but the new word suggests that Morgan Stanley is putting a lot of faith behind the American juggernaut, elevating its price target to a new Street high figure.
The New Attraction
Morgan Stanley recently bumped up its assessment of GE's likely fortunes, hiking the stock's price target from its previous level of $13 per share and putting it up to $17 per share, which is actually the current high-water mark for the company's share price. Reports suggest that Morgan Stanley reconsidered the rating on the strength of new recovery that may emerge from GE's aviation operations.
There are some similar reports that suggest such turnaround may be in the cards, though not necessarily connected to GE's aviation program. Word out of GE's fourth-quarter report is that the company is looking to establish free cash flow figures between $2.5 billion and $4.5 billion this year. With even a pessimistic landing in that range, it will still represent a beat from analyst forecasts, reports note, so it's looking like GE may be able to pull further revenue and earnings beat out of its collective hat.
Part of a Growing Chorus
While the gaining sentiment seen at Morgan Stanley is certainly welcome, it's actually not the first time we've seen analysts change their mind about GE. In fact, GE has had an oddly regular pattern of analyst sentiment over the last six months, as our latest research indicates. The consensus has been a “buy” for the last six months, but the ratios involved have wavered just a bit in that time
Six months ago, the company had seven “hold” ratings and eight “buy” ratings making up the ratio. That improved to the bullish three months ago, when the company had six “hold” and eight “buy”. A month ago, it slipped back to the point it was six months ago, with seven “hold” and eight “buy”, but with the latest figures, it's gained back to where it was three months ago, with six “hold” and eight “buy.”
However, the price target has not suffered such vacillation. It's only gone up for the last six months, and for the first time, now includes some downside risks. Six months ago, the company was at $9.13 per share, jumping to $9.61 three months ago. A month ago, it increased to $10.40, and now, we sit at $11.15. Given that a share of GE currently sells at $13.61, there's clearly a note of downside involved.
A Change in the Air
The change in sentiment from Morgan Stanley is just the latest such change. Just yesterday, reports note, UBS hiked its price target to $15 per share, and Goldman Sachs kicked its own price target up from $14 to match UBS at $15 per share. That's three analysts in a little over a month that are looking for GE stock to take a nice little ride upward from current levels. Moreover, UBS had issued a hiked price target back in late November, going from $9 per share to $12.
UBS's second price target boost, reports note, is at least partially a function of the latest COVID-19 relief bill that made it through the House of Representatives; as part of the terms of the bill, shortfall amortization rates would be extended from the current seven years to 15, and would also help provide a stable point for considering future interest rates. The result could be very helpful in terms of GE's pension liabilities, essentially giving the company back a little money as a result and helping to achieve that targeted cash flow figure mentioned previously.
It would be better if GE were making headway based on a competitive edge or new products coming to the market. Cost savings are cost savings, though; while some savings are better than others long-term, short-term, take the win where you can find it.
A look at some recent guidance certainly helps positive assessments. Four key segments of GE's operations were recently projected into this year, and the outcomes are quite a surprise. Aviation is looking for a “partial recovery,” which is what gave Morgan Stanley the reason to boost its figures to begin with. Renewable energy is looking “up and positive”, reports note, while healthcare is looking “flat to slightly up”. Power, meanwhile, is looking “flat,” which means no real bad news incoming. There are improvements slated for three out of four key segments and no losses projected.
All of these points together add up to one major outcome for investors: things are looking up going forward. Is that a reason to buy in on GE? Only the individual investor can answer that for certain, but the numbers and current projections certainly provide a basis for confidence
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