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General Electric stock is moving Friday. The overall stock market is higher, but
shares have a new top target price on Wall Street. Bullish analysts can always help boost a company’s shares.
Citigroup analyst Andrew Kaplowitz reinstated coverage of GE (ticker: GE) stock Friday with a Buy rating and $17 price target, the new high-water mark on the Street. The previous top target was $16, from a couple of brokerages, according to Bloomberg.
GE stock is up 1.4% in midday trading Friday. The
for comparison, is up 1.2%. The
has gained 0.8%. For the year, GE stock is up about 22%.
Occasionally, analysts suspend ratings for a variety of reasons. Typically, ratings are suspended when brokerage bakers are doing a substantial amount of business with the covered companies. It’s a mandated investor protection to ensure that ratings are independent and not influenced by banking-business considerations.
Kaplowitz rated GE stock at Buy when he suspended coverage back in March 2021. His target price back then was $14 a share. He feels better about the stock now as the aerospace recovery picks up momentum. Aerospace is GE’s largest, most-profitable business that was hit hard by pandemic.
Commercial air traffic is improving as more people get vaccinated. Over the past three months, U.S. air traffic grew 55% compared with the prior three-month span. Traffic, however, is still down about 45% compared with 2019’s pre-pandemic levels.
Kaplowitz is also impressed with business execution noting that aerospace margins were only down about 2% year over year, despite a 30% drop in sales. This “is indicative of good traction with GE’s cost-out efforts in the business that should support strong profitability as demand recovers over time,” wrote the analyst.
Kaplowitz sees GE earning 45 cents a share in 2022. That’s actually below the consensus estimate for 54 cents a share, and means he believes the stock is worth 38 times his 2022 numbers. That’s a high price/earnings ratio for an industrial company, but GE is still in the midst of a multiyear turnaround being led by CEO Larry Culp. GE’s earnings won’t reach their full potential by 2022.
Kaplowitz’s price target is based on his sum-of-the-parts valuation, which values the aerospace, power, and health-care businesses all separately.
Write to Al Root at allen.root@dowjones.com
