Wendy J. wrote in asking…
Please cover GE stock. Not that many months ago it was at $42 a share, and as of today it is about $28 dollars a share. Do we ride it out or get out? Any information you can give would be greatly appreciated.
Well Wendy, I’d be glad to cover them.
The first thing I noticed is that they look like a falling knife. In fact, they are at their lowest point since 2004.
Lesson? You shouldn’t buy into a falling knife. Wait for the stock to bottom before you get in.
The next thing I looked at was their numbers. They have over $547 billion in debt with only about $15 billion in cash on hand. Considering the company has a market cap of $281 billion, the debt doesn’t seem to be out of control. If you look at a company like GM, their debt is five times their market cap.
GE is also cheap, trading at a forward P/E of about 11. Their projected earnings growth for the next five years comes out to about ten percent. While not stellar, it’s not bad.
Unfortunately, I think this growth maybe a little overstated.
The economy is circling the toilet as we speak, and as large as GE is, they are bound to feel the effects of that. It seems like analysts are expecting a little much from GE. And if GE disappoints again and again, investors will keep selling.
That’s not to say that GE isn’t a solid company or won’t do well in the future. It’s just that right now things don’t look to rosy for GE. Generally when a company starts losing money, they lose it for more than one quarter. I expect to see GE have anemic earnings - at best -for the next year.
This stock could easily fall back down to their 2003 lows of $20 a share. And you certainly don’t want to be holding on to them from now until then.
Let GE slide. Once you see a bottom forming, don’t be afraid to gobble this solid company up.
By Charles Delvalle
Disclaimer...The subject matter expressed above is based purely on technical analysis and personal opinions of the writer. it is not a solicitation to buy or sell.
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