Is General Electric Company a good stock to buy right now? After its toughest year since the financial crisis, General Electric Company (NYSE:GE) is off to a great start to the new year. After dropping a whopping 45 percent in 2017 the company is now experiencing an apparent turn-around with a 9 percent increase to kick off 2018. Is this the beginning of a huge bull run or a false start?
Bloomberg columnist Brooke Sutherland tried to tackle this question in an article on Friday. She believes that although GE currently has the best year-to-date performance in the Dow, it still has a lot of kinks in its armor to work out. Keep in mind that the year has only just begun and the stocks can turn in the blink of an eye. And while they are taking strides to pull out of the slump they just encountered, getting back on track will be no easy feat.
Back in November, GE had to cut its dividend and finally admit that the business could no longer produce enough cash flow to fund its rich payout. So why the sudden increase in the stock price? Analysts have a few theories on the matter. One is the simple argument that the company has nowhere to go but up. While others suggest that higher oil prices could potentially aid in its energy business.
It just so happens that analysts with accurate predictions about General Electric Company (NYSE:GE) in 2017 don’t expect much of a difference for this year. But that’s not to say that the new CEO, John Flannery, can’t turn the company around. GE will have to undergo more cuts in its assets and practice its ability to lower its pension deficiency to amend cash flow and be able to pull off asset sales. Only time will really tell whether or not the management is all bark and no bite. And Flannery acknowledges this key factor by stating, “I can say anything I want today and until we produce the results, it’s not going to matter”. We all know that these results don’t just happen overnight. It could be another year or more that buyers of the company’s stocks begin to see these results. Until then, stock-holders may be stuck with dead money.
Taking a further look at Ben Levisohn’s article published on Barron’s site, he recognizes General Electric’s 1.8 percent increase in shares bumping them up to $19.27 and furthermore the runner-up in the Dow Jones Industrial Average. Yet states that analysts’ views of their underperformance rating remain the same. They’re not willing to hold their breath just yet on GE’s opportunity to outperform even with better oil and gas climate and a tax hit from their insurance business being offset by deprivations making it a very real possibility for them to make a turnaround.
Wall Street analysts at Oppenheimer Christopher Glynn and Patrick Schuchard both advise to hold off on upgrading shares to Perform. Most likely, a smart move as chasing a stock can be a bit of a gamble. Better to see what the release of the General Electric’s earnings on January 24th has to say.
Yanni Lodato of Seeking Alpha seems to have different views on the matter and feels as though the company deserves a second look. While he observes the obvious decline in the stock market General Electric Company (NYSE:GE) has encountered over the past two years, he also acknowledges the historical thumbprint the company has left over 100 years ago. Not only responsible for the creation of the light bulb and jet engine but surviving the dot-com crash and 2008 devastation, as well. And while these factors alone do not ensure future rehabilitation of General Electric, he also suggests that the company’s ambiguous deals, unnecessary complexities, and crooked accounting could very well be a mere product of poor management.
Lodato compares the problems with the GE stock to that of similar issues that CEO, Eddie Lampert created for the Sears company; which lead them to a point of bankruptcy. Issues comparable to that of those created by preceding CEO’s Jack Welch and Jeff Immelt; which cost General Electric Company (NYSE:GE) over $100 billion! With proper strides in the right direction, new CEO, John Flannery has the ability to get the company back on track.
One thing’s for sure, the changes that Flannery intends on making in the future will either leave stock-holders content with their decision to pass on the investment or kicking themselves in the butt for not taking the chance on them. We should note that only two funds, owned by billionaires Nelson Peltz and Ken Fisher, which account for more than half of all hedge fund holdings in General Electric Company are truly bullish about the stock. Overall, hedge funds don’t think GE is a good investment. Is GE a good stock to buy right now? Only time will truly tell.