Rising from the ashes: the case of General Electric (GE) stock price

By:
on Feb 23, 2024
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  • GE share price has surged by more than 300% from its lowest point in 2020.
  • The company has shed its conglomerate discount after simplifying its operations.
  • It is also seeing robust revenue and profitability growth.

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General Electric (NYSE: GE) stock price has had a remarkable run in the past few years as investors have cheered its evolution. The stock jumped to a high of $152 on Thursday, meaning that it has jumped by over 350% from its lowest point in 2020.

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Conglomerate discount ends

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There are three primary reasons why the GE stock price has gone vertical recently. First, like Rolls-Royce Holdings, the company has found itself in industries that are doing well. The civil aviation sector is booming, with the number of aircraft orders surging to a record high.

Boeing has over 6,189 in unfilled orders while Boeing has a backlog of over 8k orders. This is important because GE is the biggest supplier of aircraft engines in the world. 

The company is also a major player in the defense industry, which is seeing strong demand amid the ongoing geopolitical issues globally. GE is a big producer of engines that power military planes.

Second, GE is slowly shedding the conglomerate discount that has existed for decades. While many investors loved conglomerates in the past, they have been disliked recently because of their low returns and bureaucracy. As such, most conglomerates tend to always trade at a discount.

GE has shed this discount by separating its business into three standalone businesses: GE Healthcare, GE Aviation, and GE Vernova. It has already taken GE Healthcare public and it plans to take Vernova public soon.

GE Vernova, like Siemens Energy, has been a key drag to General Electric for a long time. As such, separating it from the main company will remove its ‘noise’ from GE. 

The remaining company will be a giant in the aviation industry. As a result, the discount that GE has is gone. The company now trades at a forward PE multiple of 32, which is higher than the sector median of 17. Its forward EV to EBITDA has risen to 16.2, higher than the industry median of 15. 

Third, GE has embarked on a path toward profitability. Its net profit in 2023 jumped to more than $9.4 billion from the previous year’s $339 million. This is a great number for a company that was used to make substantial losses a few years earlier. Therefore, there is hope that the company will gradually grow its dividends in the next few years.

Still, there are some potential risks that GE faces. For one, the current rally means that the company is not cheap and that it is trading at a premium. This valuation is likely because analysts expect its revenue and profits to hit $78.8 billion and $6, respectively in 2026.

The other risk is that Boeing, its biggest customer is going through a major challenge after the recent Hawaii Airlines incident. This could affect GE’s growth in the near term.

GE stock price forecast

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ge stock

GE chart by TradingView

The weekly chart shows that the GE share price has jumped in the past few years. It has risen in the past seven straight weeks. And as a result, the rally is being supported by the 50-day moving average. 

The Average Directional Index (ADX) has moved to 60, signaling that there is strong momentum. The same is true with other oscillators like the Relative Strength Index (RSI) and the Stochastic Oscillator.

Therefore, the outlook for the General Electric share price is bullish, with the next point to watch being at $180.17, its highest point in 2016. This price is about 20% above the current level.

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