Shares rose more than 6%
General Electric (GE) started 2019 on a strong note. The stock gained 6.3% on the first trading day of the year. The shares went as high as $8.18 or 8.1% on January 2 before settling at $8.05. The stock rose despite a flat broader market performance. The Dow Jones and the S&P 500 indexes registered just a marginal gain of ~0.1%.
There wasn’t any major news about the significant rise in the company’s share prices. However, there’s one important aspect in the stock’s recent price appreciation. General Electric shares have been gaining considerable momentum since December 13. Long-term bearish analyst Stephen Tusa at JPMorgan Chase (JPM) upgraded his rating on the stock.
On December 12, the stock touched its ten-year bottom of $6.66 before closing slightly higher at $6.71. Since the rating upgrade from Tusa, General Electric shares have gained ~20%.
On December 13, in a note to clients, Tusa stated that the struggling company’s risk-reward looks to be balanced at the current levels. Justifying his rating upgrade, Tusa said, “We now believe a more negative outcome on these liabilities (equity dilution is one) is at least partially discounted, and it’s possible the company can execute its way through an elongated workout that limits near-term downside.”
On December 19, General Electric got another boost from Vertical Research analyst Jeffrey Sprague. Sprague raised his rating on the stock for the first time in ten years to “buy” from “hold.” He also increased his target price 10% to $11.00. Sprague thinks that General Electric will complete its restructuring plan on time. He doesn’t think that the company will face a severe liquidity crunch in the long run.
Performance in 2018
Dismal quarterly results and debt concerns took a toll on General Electric stock in 2018. The stock was the most battered stock in the industrial sector (XLI). General Electric was also the third-worst performer among the NYSE listed stocks after Coty (COTY) and Mohawk Industries (MHK).
In 2018, General Electric fell 56.6%, while Coty and Mohawk Industries lost 67% and 57.6% of their respective value. In 2018, General Electric lost its A-level credit rating. General Electric was taken off the Dow Jones’s 30 stock index list.