General Electric plunges to its lowest level since the financial crisis after JPMorgan slashes its price target
- General Electric received its most bearish price target on Wall Street Friday, sending shares down 9%.
- GE is facing a fundamental problem, said JPMorgan analyst Stephen Tusa.
- The company recently reported disappointing quarterly earnings results.
- Watch General Electric trade in real time here.
General Electric is getting slammed Friday, down more than 9%, after JPMorgan slashed its price target from $10 to $6, the lowest on Wall Street. Shares are trading at their lowest level since March 2009.
"The outcome of GE results was worse than expected on almost all fronts," Stephen Tusa, an analyst at JPMorgan said about the company's third-quarter earnings.
"While liquidity is certainly debatable, we believe this is not really about liquidity, it's about a deterioration in run rate fundamentals."
According to Tusa, in the worse case, GE will have $100 billion in liabilities and zero enterprise free cash flow even after slashing its dividend to a penny when it reported its third-quarter results.
In that quarterly report, GE took a $22 billion write-down to its struggling power business, which it said was being investigated by both the Securities and Exchange Commission and Department of Justice.
When GE firstly announced the goodwill charge in October, along with the promotion of a new CEO Lawrence Culp, shares rallied by more than 20% as investors looked past the company's lagging power business, price-cost pressures compounded by US-China tariffs, and behind-schedule deliveries of its LEAP engine. The stock has since sunk to new lows.
"The recent pull back seems capitulatory, but the brief share price increase prior to this on a new CEO, along with sell side upgrades adding to the positive shift in sentiment, still pointing to $1 in EPS potential, did not reflect what we now know around the numbers," said Tusa.
Shares are down 54% this year.
Now read:
- GE slashes its dividend to a penny, says the SEC and DOJ are investigating its power-business charge
- General Electric's new CEO should 'put a floor in the stock,' RBC says
