GE Aerospace stock is falling: buy the dip or sell the rip?

GE Aerospace stock price has plunged in the last month, erasing the gains made after it released its financial results.

It dropped to $290 on Thursday, its lowest level since December 11 this year.

This retreat may continue in the near term ahead of Donald Trump's trip to China.

Why is the stock slipping?

GE Aerospace stock has retreated in the past few weeks as the war in Iran gains momentum.

One impact of this war is that the civil aviation industry, especially in the Middle East, has been impacted. 

Most airlines in the region have reduced their schedule as Iran has continued to bomb some key airports, including in Dubai.

This war has an impact on GE Aerospace as it makes substantial sums of money servicing aircraft engines.

As a result, with some airlines staying idle, the company will likely experience some revenue as the war continues.

The war has also led to higher metal prices, which may impact its margins in the foreseeable future.

This war will also lead to supply chain disruptions as we experienced during the pandemic.

Most recently, President Donald Trump has announced that he will postpone his trip to China, which was expected to happen next week.

Chinese airlines are expected to make over 500 orders from Boeing, a move that will benefit GE as it is the biggest engine supply to Boeing.

At the same time, while GE’s business is growing, its valuation has jumped in the past few months.

Data compiled by Seeking Alpha shows that it is a highly valued company, with its forward price-to-earnings ratio rising to 40.50, higher than the sector median of 18. 

This valuation is also higher than the five-year average of 42. It is also higher than other companies, including NVIDIA and Micron, which have forward PE multiples of below 25.

GE Aerospace has a forward PEG ratio of 3.03, which is also much higher than the sector median of 1.63. 

Still, despite this view, analysts believe that it has more upside ahead, with the average estimate among analysts being $425, much higher than the current $292. 

The most recent upgrade came from Bernstein, which boosted the price target to $405 from the previous $374.

This upgrade came after the company published strong financial results, with its orders rising to $27 billion and its revenue rising by 18% to $1.7 billion.

For the year, the company received over $66 billion in orders, while its revenue rose to $66.2 billion.

GE stock price technical analysis 

GE stock chart | Source: TradingView

The daily chart shows that the GE stock price has slumped from $346 in February to the current $290.

It has dropped below the ascending trendline, which connects the lowest swings since August last year. 

The stock has dropped below the 50-day moving average.

It also moved below the strong pivot, the reverse level of the Murrey Math Lines tool.

At the same time, the Relative Strength Index (RSI) has dropped and is nearing the oversold level at 30.

Therefore, the stock will likely remain under pressure in the near term and then resume the uptrend.

It may drop to the support at $250 and then rebound as the war nears its end.