To say General Electric (NYSE:GE) has had a hard go of it over the last few years is an understatement worthy of calling co-founder Thomas Edison an amateur tinkerer. GE stock practically killed its once-legendary dividend, got delisted from the Dow Jones Industrial Average and wallowed with the rest of the market in 2020’s first quarter pandemic collapse.
On March 23, shares hit $6.11, their lowest point since 1991. Then a funny thing happened: Almost imperceptibly, GE mounted a comeback. Since that date, GE stock is up 78%. And if you asked the analysts some months back, they’ll tell you they saw it coming.
Betting on a legacy stock in what resembles a death rattle often takes nerves of steel to make a poker champ look like an angsty teen. Nonetheless, 11 out of 19 called GE stock a buy three months ago. Don’t you wish you had listened? Or maybe you did. All I know is I wish I had.
GE Stock Winning Over Wall Street
So, can GE keep it up? Yes, if third-quarter earnings offer any indication. Where analysts predicted a loss of 4 cents a share, GE stock scored a knockout with a gain of 6 cents. Looking ahead to the next two quarterly reports, analysts expect GE to remain profitable — and three more have joined the ranks that recommend a buy, bringing the number up to 14.
You could call it the Blessing of Edison, which also happens to be the moniker for the company’s health care software platform. The novel coronavirus pandemic has accelerated adoption of Edison, even as the company reports progress on artificial intelligence-enabled X-ray scanners and ultrasound.
In light of this news, Bank of America’s Andrew Obin on Dec. 4 raised his GE stock price target from $11 to $13 per share. The good news came fast on the heels of Oppenheimer’s Christopher Glynn upgrading GE stock to “outperform,” noting that “GE continues to emphasize a long game of inches.”
The Case for Larry Culp
Corporate leadership and investor confidence remained forever linked and in the case of GE’s CEO Larry Culp, the company has a captain worthy to hold the same title as the legendary Jack Welch, who passed away in March. In Welch’s obituary, the New York Times reminded all that Fortune had once hailed him as “manager of the century.” And why not? Over the 20 years Welch served as CEO, from 1981 to 2001, GE stock soared in total value from $14 billion to more than $410 billion.
Today, GE’s market capitalization sits at just $95 billion. And by the time Culp came aboard in October 2018 as the first outsider CEO since the company’s 1892 founding, GE was in ruins. Within two months, GE stock slashed its once-legendary dividend to just a penny.
Yet if Culp can keep GE on the course he’s set these last two years, he might just be an early nominee for Manager of the 21st Century. In August, GE’s board extended his contract to 2024 and offered him an additional $230 million if he can hit key financial targets. As CNN noted, “The move underscores how essential Culp is viewed by Wall Street and GE’s board to turning around the once great company.”
With (Much) Respect to General Electric
GE stock has plenty to recommend it these days, for at less than $11 a share it still has lots of room to run and is well below the highs in enjoyed during Welch’s reign. As my InvestorPlace colleague Nicolas Chahine pointed out, GE also has strong upsides in its energy and aviation operations, poised to gain traction as we inch closer to a post-pandemic horizon.
That said, GE still has some unpleasantness to slog through. Harry Markopolos — the whistleblower who revealed Bernie Madoff’s Ponzi scheme — released a scathing 175-page report in August 2019 that alleged financial manipulations amounting to “a bigger fraud than Enron.” In October, the Securities and Exchange Commission notified the company that it is considering civil action against it.
Nor is GE stock for everyone, as the company falls into the same frumpy category as Ford (NYSE:F) and IBM (NYSE:IBM). All three don’t get the respect they deserve, and for a Robinhood crowd that adores speculative investments in sexy high techs and electric vehicle companies, they’re downright snoozers.
Yet if you can invest in GE stock while it’s clearly on the upswing — getting the thumbs up from analysts and a helping hand from an admired CEO who has it on the right track — then chances are you will sleep soundly, knowing you made the right call.
Wait! Was that a GE light bulb that just went off over my head?
On the date of publication, Lou Carlozo did not have (either directly or indirectly) any positions in the securities mentioned in this article.
