Shares of General Electric Co (NYSE: GE) fell, again, this week with investors pondering if new Chief Executive John Flannery’s massive overhaul effort will revive the struggling 125-year-old Dow arm. His goal was to save billions of dollars by shrinking the conglomerate but many are not certain this will do the trick.
In a note to clients, analyst Deane Dray comments, “We attribute the sharply negative stock reaction to the Nov-13 unveiling of new CEO John Flannery’s turnaround plan to a number of disappointments and unsettling disclosures. Turnaround plan fell short of the sweeping reset of the business model/portfolio many had hoped for. [There are] few reasons to believe the stock bottoms here.”
More specifically, the stock fell as much as 8.2 percent on the day, Tuesday, to $17.46. It had been down 5.3 percent on Monday, in afternoon trading, compounding its early 7.2 percent. Altogether this comes together to equal the worst two-day streak since the US financial crisis of 2009.
According Deutsche Bank analyst John Inch, GE now has a “sell” rating, with a price target of $18. He contends, “With more than 40 percent of GE’s common equity owned by retail investors, we believe substantial near tem selling pressure on GE could further ensue as retail investors who previously counted on the GE (NYSE: GE) dividend look elsewhere.”
Dray went on to say that his new price target for General Electric is $20, down from $25 last week.
Furthermore, he adds that when the company admitted it had paid out a dividend higher than its industrial cash flow for years it was “particularly damaging.”
He concludes, “We believe the new disclosures at GE’s analyst meeting suggest deeper structural problems than we had anticipated.”
At the end of the day, Westwood Holdings Group, Inc vice president Scott Lawson notes, “There’s a big challenge ahead of GE: you really have no reason to change your outlook on the business.” Of course, the company had already sold most of its shares earlier this year.
Earlier in the week, GE (NYSE: GE) had said it would look into exit strategies from industries like lighting and locomotive-manufacturing. The company also commented that it is also weighing the sale of its stakes in Baker Hughes, which provides oil-field equipment and services.