GE: Undervalued By About $68 Billion

Feb. 07, 2019 8:31 AM ETGeneral Electric Company (GE)182 Comments

Summary

  • GE's had a rough couple of years, declining by a staggering 78% from its peak in early 2017 to its bottom last December.
  • However, the company's incoming CEO and the company's recent earnings report suggest the worst is likely behind GE.
  • The company seems intent on sticking to its plan, strengthening its balance sheet, and improving core business operations.
  • Additionally, the combined worth of GE's businesses appears to drastically supersede the company's current combined market cap and debt value.
  • Despite the recent rebound, GE appears to be substantially undervalued by about $68 billion, implying that the stock likely has about 77% upside from here.
  • This idea was discussed in more depth with members of my private investing community, Albright Investment Group . Start your free trial today »

General ElectricSource: Dailygazette.com

GE: Undervalued By About $68 Billion

General Electric (NYSE:GE) has endured a couple of very difficult years. In fact, since 2017 began, GE declined by a staggering 78%, before the stock finally bottomed last December. Numerous factors, like a substantial slowdown in its key power business, an earnings recession, financial woes from its capital segment, dividend cuts, dismissal from the Dow, and even possible bankruptcy whispers, were amongst the various factors behind the epic fall of one of America's greatest companies.

GE 2-Years

Source: StockCharts.com

Abysmal sentiment, forced selling, and panic brought GE's stock down to absurdly low levels, and despite the company's recent bounce back, GE remains underappreciated and undervalued and its stock underpriced.

The stock price continues to reflect significant risk, despite GE's improving financial position. Furthermore, the company's depressed valuation suggests investors are too focused on past and near-term earnings results and are not focusing enough on the potential value of GE's businesses.

A breakup valuation of GE's parts suggests the company's current market cap may be discounted by about $68 billion, which implies the stock price could appreciate by about 77% to make up this difference. Additionally, numerous fundamental, technical, and psychological factors suggest the worst is behind GE, the company's position is likely going to continue to improve, and its stock price should continue to trend higher throughout 2019.

Q4 Earnings: Suggesting Worst is Behind GE

GE shares took off by 11%, the most in 9 years, following the company's earnings announcement last week. The better-than-expected earnings report suggests last quarter (Q3) was likely Larry Culp's kitchen sink, and GE can begin laying bricks to build its constructive road forward from here.

As far as the actual numbers, GE beat consensus estimate revenues by nearly $700 million, reporting $33.28 billion vs. estimates for $32.6 billion, although adjusted EPS came in

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This article was written by

Victor Dergunov profile picture
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The #1 Service For Diversified Portfolio Profits

Hi, I'm Victor! It all goes back to looking at stock quotes in the old Wall St. Journal when I was a kid. What do these numbers mean, I thought? Fortunately, my uncle was a successful commodities trader on the NYMEX, and I got him to teach me how to invest. I bought my first actual stock in a company when I was 20, and the rest, as they say, is history. Over the years, some of my top investments include Apple, Tesla, Amazon, Netflix, Facebook, Google, Microsoft, Nike, JPMorgan, Bitcoin, and others.

Disclosure: I am/we are long GE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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