Longtime bearish analyst Stephen Tusa of J.P. Morgan upgraded shares of General Electric to neutral from underweight on Thursday and removed the stock from the firm’s short idea list, saying the embattled industrial giant now has a more “balanced risk reward at current levels.”
“Key to the story, in our view, is the outcome of ‘known unknowns’ in near term, which are better understood and around which debate is more balanced, as opposed to being overlooked by most bulls in the past,” Tusa wrote in a note Thursday.
“We now believe a more negative outcome one 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,” Tusa added.
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GE shares jumped 9 percent in premarket trading to $7.33 from Wednesday’s close of $6.71 a share.
Tusa put out a bearish note on GE in May 2016 when the stock was above $30 that questioned the conglomerate’s earnings and cash flow outlook. As the shares plummeted, Tusa gained a following on Wall Street with his later calls that the dividend would have to be cut coming true. His notes on the company will often move the stock on the days they come out.
GE shares fell as low as $6.66 this week, which was their low close during the financial crisis. GE cut its dividend to a penny officially last week, a move which alienated many of its longtime shareholders.
Tusa said in the note that he sees “upside risk” to the stock of $8 and “downside risk” of $5.
Source: cnbc.com | Original Link