Tusa Note Sparks Downside for General Electric Stock

The J.P. Morgan Securities analyst says GE's fundamentals are still a concern

by Patrick Martin

Published on Aug 12, 2019 at 10:03 AM

The shares of General Electric Company (NYSE:GE) are down 2% to trade at $8.98 this morning, after J.P. Morgan Securities' analyst Stephen Tusa weighed in on the former Dow name. While the noted GE bear maintained his "underweight" rating and $5 price target, he noted that the company's "fundamentals on net continue to look negative," which is "tough to turn in long cycle markets, especially when technology is lagging."

On Friday, General Electric stock breached its 200-day moving average on a closing basis for the first time since early June. Now, the shares are heading for their lowest close since early April, and have shed 14.5% this quarter already. The $10.80 level has emerged as a stiff ceiling for the stock in 2019, despite a 23% year-to-date lead. 

Today's skepticism from the analyst community is nothing new; eight of the 14 brokerages in coverage rate GE a "hold" or "strong sell." And in the options pits, the security's Schaeffer's put/call open interest ratio (SOIR) of 1.36 ranks in the 88th annual percentile, showing an unusual put-skew among options expiring within three months.

General Electric stock has certainly been an attractive target for those buying premium during the past year, in the sense that it's made bigger moves than what the options market was pricing in. This is according to the security's elevated Schaeffer's Volatility Scorecard (SVS) reading of 86, out of a possible 100.

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