GE shares surge after analyst downplays 'known unknowns'
GENERAL Electric climbed in pre-market trading as JPMorgan analyst Steve Tusa upgraded the company to neutral from underweight as the liabilities and "known unknowns" are better understood and reflected in the stock price.
While the challenges remain the same - the need to reduce debt and pension liabilities, restructure the power business and improve free cash flow - an equity capital raise would help address the leverage issues and also protect the balance sheet from a potential downturn, Mr Tusa wrote in a note yesterday.
However, he warned that a reset in free cash flow expectations may be necessary, even as it could provide a bottom for the stock.
"We believe a more negative outcome on these liabilities (equity dilution, for one) is at least partially discounted, and it's possible that the company can execute its way through an elongated workout that limits near-term downside," Mr Tusa wrote in the note.
Mr Tusa had been a long-time bear on the stock of General Electric (GE), carrying a sell-equivalent rating since May 2016.
He still holds the lowest price target on Wall Street at $6 (€5.28), compared with the average $11.33, according to data compiled by Bloomberg.
GE has nine analysts who rate it a buy, 13 calling it a hold and two saying sell.
Separately, GE Digital announced that it would sell a majority stake in its ServiceMax cloud-based field-service software to Silver Lake and create a new industrial Internet-of-things firm with starting annual revenue of $1.2bn.
GE shares surged 9.8pc to $7.37 at 7:15am in early New York trading.
The stock has lost about 80pc of its value since its July 2016 high, falling to its lowest level since March 2009 in the past month.