Hey Traders,

GE is one of the oldest companies in the S&P 500.

While much smaller than it was 10 years ago, this widely held stock is still worth about $90 billion

GE executed a reverse stock split on July 30, 2021. Since then the stock has essentially meandered lower …

It is now trading at about $80 per share. But that is off the lows of 2022, when it traded in the mid-$40s

This is a company in the midst of great change, including the spinoff of a healthcare unit, which has allowed it to focus on core business.

The Good:

GE is in some businesses that are growing … and they have a strong hold in some very profitable areas.

Jet engines are a cash machine for GE. In fact, the engine division produces so much cash it spent the last decade covering up wider mismanagement and allowed the company to keep paying a dividend.

GE also stands to potentially be one of the big winners in the green energy movement with the company having a strong foothold in wind energy products, not to mention nuclear energy and hydroelectric.

If Europe wants to go green, GE nuclear is going to offer a strong way to get there. The same holds true in the US. Bottom line: the green energy movement continues at its current pace, GE is going to make a lot of money.

Actual earnings are also trending higher. In January, the company reported $1.24 per share in earnings. A strong report.

But if the stock is going to go higher, that is not enough, because the PE is $152.82 pre share.

Which brings us to …

The Bad

GE has a lot of debt and is still reeling from the 2008 financial crisis that almost blew it up.

The former CEO was a terrible caretaker of the company, though the new CEO Larry Culp has done a decent job of picking up the pieces.

The future of the company is still reliant on green energy, and while nuclear appears to be gaining in popularity as a solution to the revolution, there are huge NIMBY issues when a state or country actually tries to build one.

Nuclear energy is great … according to most people. Ask people near Three Mile Island how they feel about it.

The company could grow and still not see a huge uptick in stock price until it gets a handle on debt and starts to become really profitable

A net income of $585 million for a $90 billion company is not a lot, thus the lofty PE.

All told … 

I see GE more likely than not breaking back above 100 if they keep announcing energy deals.

The potential for a GE Aviation spin off could also generate buzz which would put a bid on the stock.

If the stock gets back into the low 70s it is probably a buy. At $83 per share, it is dead money near-term.

Long-term, again, I think the stock is going to go up.

Your Only Option,

Mark Sebastian

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