Why GE Stock Is A Buy For Next Year
Will restructuring its power business be enough?
Despite having a stocker of a year, General Electric is an interesting prospect for the next 12-months. It is likely that GE stock (NYSE: GE) has been through its lowest points this year, with the investor confidence already so low there is only one way that GE stock.
What Happened With GE Stock In 2018?
The past 12-months have been incredibly poor for GE. With investors being let down at every quarterly report it is easy to see why the company experienced mass selloffs. The factors that disappointed investors the most ranged from low earnings to a SEC investigation that cost the company billions, not forgetting the dividend being completely wiped out and yet another CEO taking over leadership. Many analyst downgrades over the course of the year also send investors into a selloff frenzy. Another worrying factor is that General Electric stock was removed from the Dow Jones Industrial Average earlier on in the year.
Since January, GE stock price has fallen by over 58 percent. For many portfolios, GE is a major problem because it is currently too low to sell.
Could GE Decline Further?
December has been a record breaking month for the stock market, with highs and lows that have not been seen in decades. GE stock has increased to $8 in December, but these short-term gains could be slashed if investor confidence changes.
Will 2019 Be GE’s Year?
Since GE removed Flannery as its CEO back in October, its direction has changed significantly. According to management, General Electric will be mainly pursuing Aviation, Power and Renewables. These sectors will be the new core of GE’s overall business. The other businesses that General Electric was failing in have since been scrapped to focus on the higher-performing ones.
GE’s power business will be the main priority for the company moving forward, its performance will be a strong indication for investors wether GE stock is a good buy or not. GE took an impairment charge for its power business in the form of $22 billion. For investors, it is essential that restructuring is completed on the power business to offset the losses in the gas turbine market. For GE stock to make meaningful and long-term gains, the restructuring in its core business will be the catalyst.
The Risks To Take Into Consideration
Despite the optimism surrounding GE stock in 2019, there are some major risks that could prevent any gains being made.
If General Electric cannot restructure its power business successfully, its cash flow and margin problems will continue to push investors away.
Secondly, if the U.S finds itself in a recession i 2019, GE’s aviation, oil and gas businesses would all decline significantly.
Lastly, if GE stock price falls below its low of $6.66, its price could fall further and no short term gains would be possible.
To conclude, General Electric is turning around its core business and giving investors a reason to think again about selling off their shares. With capital being spend more efficiently, there is little reason to believe that things would get worse for GE shares.
The low level that General Electric stock currently sits at is a strong entry point for investors because of its upside potential.
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