Right now, its promise is Predix, an industrial Internet of Things cloud it features in advertising, along with a young software engineer named Owen, after Owen Young who chaired the company in the 1920s. (He can’t lift the hammer.)
But the present company is hard to recommend. While half its analysts rate it as a “buy,” expecting earnings of $1.66/share for 2017, that’s a forward price-earnings multiple of nearly 19, against a current P/E of nearly 32. Add that 3% dividend yield and you get a stock that must do great just to match the market.
If you’re a GE investor with a long-term horizon, meanwhile, you don’t know what you’re going to get. Immelt’s successor is likely to have a completely different vision for the company, just as Immelt had, and expect you to wait for years on a return from that vision, just as Immelt did.
Bottom Line on GE Stock
GE is what analysts call a widows-and-orphans stock. If you got in at the 2009 bottom it has delivered a solid return, but widows-and-orphans buy on their own schedules, and few were taking plunges on anything in 2009. GE’s stock gain over five years trails the averages.
A big run-up in energy prices will give some lift to the shares this year, but those prices are up 50% in the past year while GE stock is up just 10%.
It may be time for GE shareholders, starting with this one, to give up on Jeff Immelt.
Dana Blankenhorn is a financial and technology journalist. He is the author of the sci-fi novella Into the Cloud, available at the Amazon Kindle store. Write him at email@example.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in GE.