Has General Electric Company (NYSE:GE) Bottomed In Readiness For A Rally?
General Electric Company (NYSE:GE) stock has declined by about 25% so far this year, which has led many analysts to take a bearish position regarding the company. Analysts at JPMorgan recently issued a research note on the company rating the company as an underperformer and lowering their price targets.
However, I propose that the concerns raised by JPMorgan are not new and that GE’s poor run this year was largely expected. The company is undergoing a transformational process under the leadership of new CEO, John Flannery, who lowered GE’s financial outlook over the next few quarters.
The analysts at JPMorgan reported that they believed GE does not possess excellent growth potential over the short-term and that its cash flow problems will persist. GE currently trades at a two-year low and it is not clear whether the stock has bottomed. This is especially important for investors who are interested in the company’s long-term value, which includes dividend payments.
GE has significant untapped growth potential in the IIoT (Industrial Internet of Things) segment as well as in its digital division. The company has invested significant resources, up to $1.5 billion in acquiring software companies that could drive the future growth of its digital segment.
Currently, most hardware companies are facing challenges in the market, as customers prefer to buy software services instead of hardware. GE’s digital division is well positioned to exploit this emerging trend due to the major investments the company has made in its digital division.
The new CEO has instituted some turnaround strategies aimed at cutting costs and boosting the company’s profitability in its core operational segments. These strategies include cutting some jobs and eliminating business activities that are unnecessary in the conglomerate’s long-term strategy.
John Flannery is expected to reveal GE’s full turnaround strategy sometime in November; the report will highlight the company’s problems as well as possible solutions.
The question on most investors’ mind is whether GE has bottomed and if now is the right time for long-term value and dividend investors to take positions in the company.
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