J.P. Morgan Securities Sets Street-Low GE Stock Price Target

The analyst in coverage said GE's sell-off still doesn't reflect weak fundamentals

Nov 9, 2018 at 9:48 AM
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The hits keep coming for General Electric Company (NYSE:GE), which saw its price target slashed to $6 from $10 at J.P. Morgan Securities -- the lowest on Wall Street, and a 34% discount to last night's close. This comes in response to GE's dismal third-quarter earnings report from late October, which the brokerage firm said signaled "a deterioration in run rate fundamentals."

Further, the analyst in coverage said he expected GE to earn full-year profits of 35 cents per share and 41 cents per share in 2019 and 2020, respectively, about half of what Wall Street is currently forecasting. He also reiterated his "underweight" rating, and said the stock's sharp sell-off "still does not sufficiently reflect the fundamental facts."

GE's technical troubles have been fodder for the Street for some time now, with the shares down nearly 75% from their 2016 peak at $33. More recently, the former Dow stock has taken a nearly 50% haircut in 2018, with a short-lived rally in mid-October quickly halted by its 160-day moving average. Underscoring this weakness, General Electric shares are down 3.9% to trade at $8.75, tagging a new nine-year low of $8.70 out of the gate.

Options traders have been bracing for more losses, too. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), GE's 10-day put/call volume ratio of 0.55 ranks in the 78th annual percentile. While this shows that more calls than puts have been purchased on an absolute basis, the rate of put buying relative to call buying has been quicker than usual.

Skepticism has been ramping up outside of the options pits, too. Short interest on GE surged 24.2% in the most recent reporting period to 124.16 million shares -- the most since mid-July. This could exacerbate losses for General Electric, should shorts continue to target the struggling stock.

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