Time To Buy Ge Stock
Not long ago, General Electric (GE -0.01%) seemed to be regaining investors' favor. The company posted a big earnings beat in late July, although it did reduce its full-year forecast for free cash flow. As a result, GE stock rallied 29% between mid-July and mid-August.
time to buy ge stock
That momentum didn't last. Worries about inflation, rising interest rates, supply chain chaos, and a potential global recession have caused GE stock to tumble 18% over the past month, wiping out nearly all of the gains it made in late July and early August. That has created a fabulous buying opportunity for long-term investors.
GE stock slumped more than 10% last week alone. A higher-than-expected August inflation reading contributed to the drop. However, warnings from GE's senior management about continuing supply chain problems have also dragged the stock down.
Growing concerns about how inflation and rising interest rates will impact the economy have also pulled GE stock down over the past month. Many investors view General Electric as an economic bellwether: i.e., that its revenue and profit prospects are closely tied to the health of the economy.
As supply chain constraints ease, the healthcare and aerospace businesses should deliver impressive revenue and earnings growth regardless of macroeconomic conditions. That makes the recent sell-off in GE stock look like an even more appealing buying opportunity.
Revenue and profit growth from the aviation market recovery, rising healthcare demand, and restructuring in the power and renewables businesses would give GE stock substantial upside under any circumstances. But General Electric's plan to split into three separate companies focused on aerospace, healthcare, and energy will magnify that upside.
The planned 2024 spinoff of GE's power and renewables segments as a new energy-focused business will decouple these highly volatile, low-margin businesses from the aerospace division, which is GE's crown jewel. The remaining aviation business is poised to grow rapidly as supply chain problems fade, capitalizing on pent-up demand. It, too, will merit a much higher valuation than GE stock is getting in the market today.
General Electric has a current market cap of approximately $73 billion, just 10 times the $7 billion of free cash flow that it expected to generate in 2023 as of March. The ongoing supply chain problems may disrupt GE's ability to hit that near-term target. Three years down the road, though, free cash flow (including GE's spinoffs) will likely be even higher. That makes GE stock a great value at its current price.
Shares of General Electric have jumped in 2023 and since the March 9 event. GE stock topped an 84.13 handle buy point in mid February. The stock went on to peg a multi-year high of 94.94 on March 9 after management gave a strong aerospace outlook.
Now shares have formed a three-weeks tight pattern with a 95.04 buy point. GE stock is roughly 2% below the entry, and a breakout would give the alert investor a chance to add shares ahead of another possible price run and new highs.
The relative strength line for GE stock rallied in the past year, but has flattened out in March. A rising RS line means that a stock is outperforming the S&P 500. It is the blue line in the chart shown.
On key earnings and sales metrics, GE stock earns an EPS Rating of 45 out of a best-possible 99, and an SMR Rating of C, on a scale of A (best) to E (worst). The EPS Rating compares a company's earnings per share growth to all other companies. The SMR Rating reflects sales growth, profit margins and return on equity.
Over the long term, buying an index fund, such as SPDR S&P 500 (SPY), would have delivered safer, higher returns than GE stock. If you want to invest in a large-cap stock, IBD offers several strong ideas here.
In early November, General Electric (GE -0.01%) announced that it would split into three separate companies focused on the aviation, healthcare, and power markets, respectively. Investors applauded the move, boosting GE stock beyond $110 for the first time in months.
Since then, a variety of factors (including inflation fears, concerns about the omicron variant, and continued supply chain headwinds) have crushed the stock's momentum. GE shares have moved even lower since the company reported its fourth-quarter results on Tuesday, falling to around $90.
Looking ahead, General Electric is poised to benefit from numerous tailwinds. First, it ended 2021 with the best balance sheet it has enjoyed in a long time, after reducing gross debt by $87 billion in three years. The company's rising free cash flow and $13 billion of investments in AerCap and Baker Hughes give it plenty of firepower to continue paying down debt in 2022 and 2023.
GE expects to generate between $5.5 billion and $6.5 billion of free cash flow in 2022. That makes GE stock cheap based on its current market cap of roughly $100 billion. And considering the aviation and healthcare units' strong growth prospects and the benefits of splitting into three simpler companies, GE shares look like an absolute steal.
General Electric (GE) eyes a transformation as an aviation pure play. The latest GE earnings underscored strength in its jet-engine business though supply issues persist, as the big GE breakup looms. Is GE stock a buy in October 2022 as it rallies near a key technical level?
The new GE will focus on making jet engines and aviation systems. Its commercial, military and business customers include Boeing (BA) and Airbus (EADSY). The aviation business is sometimes called the "crown jewel" in GE's portfolio.
Shares of General Electric fell 0.5% Oct. 25 after its Q3 report, but have rallied since. They now eye a nearly 6% weekly gain, above 77. GE stock is closing upon the 40-week line after regaining the 10-week moving average ahead of quarterly earnings. But it remains more than 33% off its 52-week high.
General Electric shares last broke out in November 2021 on news of GE's three-way split. The breakout quickly fizzled. If GE stock rallies around 80, it might be actionable again. There's no buy point for now.
The relative strength line for GE stock is rising within a longer-term downtrend, according to MarketSmith charts. The RS line rallied for parts of 2020 and 2021 on hopes for GE's turnaround. A rising RS line means that a stock is outperforming the S&P 500. It is the blue line in the chart shown.
General Electric owns an RS Rating of 61, meaning it has outperformed 61% of all stocks over the past year. The Accumulation/Distribution Rating is a B-, on a scale of A+ to a worst E. It's a sign of roughly equal buying and selling of GE shares by big institutions over the past 13 weeks.
GE remains a popular stock with strong institutional support. As of September, 1,851 funds owned shares. GE stock shows zero quarters of rising fund ownership, according to the IBD Stock Checkup tool.
On key earnings and sales metrics, GE stock earns an EPS Rating of 42 out of a best-possible 99, and an SMR Rating of D, on a scale of A+ (best) to E (worst). The EPS Rating compares a company's earnings per share growth vs. all other companies, and its SMR Rating reflects sales growth, profit margins and return on equity.
Aerospace suppliers also struggled to deliver parts and equipment on time, due to pandemic-fueled shortages of semiconductor chips and plastics. Costs of aluminum and steel also rose. Supply disruptions from the Russia-Ukraine war and the rapid rise in inflation are newer challenges.
From a technical perspective, GE stock is rally as earnings show momentum in the key aviation business. Share are above the 10-week average but below longer-term levels, and well off highs. It has further to recover before a buy point can emerge.
After a 33% fall year-to-date, at the current levels, we believe General Electric stock (NYSE: GE) now looks undervalued. GE stock fell from $96 in early January to $65 now. The YTD -33% return for GE marks an underperformance with -22% returns for the broader S&P500 index.
General Electric GE is in the process of its planned split into three different companies focused on Aviation, Healthcare, and Energy. The Healthcare business is expected to split in 2023 and Energy in 2024, leaving the Aviation business with GE. The company has also managed to reduce its debt meaningfully to $33 billion currently, from $70 billion in 2020. High levels of debt has also weighed on GE stock performance in the past.
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I bought my first stock in 1966 and then obtained my BS in banking in 1971 and MBA in corporate finance in 1972 from NYU. A study cycles began in the same year. A 9-year psychotherapeutic training apprenticeship followed. Many of my concepts concerning crowd psychology derive from this period. From 1972 to 1990, I worked on both the buy and the sell sides of Wall Street. From 1990 to 2004, I was a technology fund manager, strategist, and a member of the currency hedging committee with the Abu Dhabi Investment Authority. Since 2004, I have operated a service from Vienna, Austria. I am a member of the Kenos Circle, a Vienna-based group of futurists. I combine fundamentals with cycles through unique software as an aid in market forecasting. The influence of cycle theorists such as Ed Dewey, Charles Jayne, George Lindsay, and R.N. Elliott have been most valuable. 041b061a72