If you just checked in on General Electric (NYSE:GE) stock recently, you might be shocked at the share price. That’s right, GE stock is now trading for around $100 per share. GE was trading below $10 not all that long ago.
This wasn’t due to a sudden change in GE’s fortunes. Rather, the company executed a 1:8 reverse split. This means that an existing shareholder has one-eighth the shares that they used to. For example, if you had held 1,000 shares, you’d now own 125 shares, but the price is eight times as high as it was previously. GE states that this move was useful in making shares more investable and restore credibility to the company.
I’m skeptical that a reverse stock split really moves the needle for GE. That said, General Electric’s more substantive operational efforts are starting to bear fruit as well. Here’s why GE stock could see further gains in coming months.
Economic Reopening Boosts GE On Multiple Fronts
GE is one of America’s most well-known industrial conglomerates. The company has downsized some in recent years, selling or otherwise shrinking exposure to certain areas such as finance and fossil fuel-based energy. Still, GE is a dominant player in health care, aerospace, and clean energy among other fields.
Aerospace’s troubles in particular are well-known. Airlines were hesitant to order new planes or spend on other capital investments given the historic uncertainty in travel demand. However, with widespread vaccine rollout, signs of a rebound in commercial aviation are becoming more apparent. By 2023 or 2024, things should be much closer to normal.
In healthcare, numerous companies saw a slowdown due to Covid-19. Hospitals, for example, couldn’t book elective surgeries when they were overwhelmed with Covid-19 patients. However, as intensive care unit (ICU) usage has dipped and hospital traffic has returned to baseline levels, those delayed surgeries are now happening once again, boosting demand for medical devices and ancillary testing and screening equipment.
GE has also bet heavily on renewable energy. It is a particular leader in energy transitions; that is to say, technologies that help companies reduce their carbon footprints. While there is still a great deal of uncertainty about the final infrastructure package, it appears Washington D.C. is set to pass something that may promote more spending in this field.
Morningstar’s Joshua Aguilar Sees Big Upside
I’m not the only one that is upbeat on GE’s prospects. Morningstar’s analyst Joshua Aguilar has a price target of $131 for GE stock right now.
Aguilar has a mix of short-term catalysts and long-term fundamentals to drive that view. One near-term possibility is the GECAS merger with AerCap (NYSE:AER). These are both airplane leasing companies. GE intends to merge its airline leasing business into Aercap and retain a sizable stake of the combined firm. This could unlock considerable shareholder value as demand heats back up. The merger isn’t finalized yet, but it is receiving more regulatory approvals.
In health care, Aguilar sees a strong demographic argument for above-average growth in future years. A large portion of the American population is moving into the retirement age range, which should drive additional demand for GE’s products. If Aguilar’s view is right, GE stock has nearly 30% upside from here.
GE Stock Verdict
It’s been a long winter for GE stock owners. General Electric shares are still down more than 50% since 2016. A combination of both management errors and external factors led to a truly disastrous situation for shareholders. That said, at this point, it appears that GE has turned the corner.
Shares have doubled over the past 12 months and appear to have more room to run, at least if analysts such as Aguilar are correct. The world economy is now well-aligned with GE’s businesses. Even aviation should eventually pick up as vaccination rates continue to climb. It’s been a trying period for General Electric, but after a long downturn, GE’s recovery is now in full bloom.
At the end of the day, a bet on GE stock is a bet on CEO Larry Culp. Culp is one of the most successful CEOs in the industrial space, just look at his masterful track record at Danaher (NYSE:DHR) previously. Early signs point to Culp instilling the same culture of efficiency and constant improvement at GE. That, along with strong economic tailwinds should power GE stock.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.
