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General Electric Co
GE Details
General Electric Co (NYSE: GE) is a high-tech industrial company. It operates globally through its four industrial segments viz; Aviation, Healthcare, Renewable Energy, and Power. The company also has a financial services segment, Capital.
Robust Performance in Q2FY21 (For the Period Ended 30 June 2021)
Key Data (Source: Company Report)
Recent Updates
Key Risks
The company’s operations are exposed to the risk of changes in macroeconomic and market conditions and market volatility. Further, it is prone to risks of changes in trade and tariffs policy, as well as regulation associated with climate change, and tax law that could impact its business. The global COVID-19 pandemic is likely to have a significant adverse impact on its operations and financial performance. Further, it operates in a highly regulatory and competitive environment.
Outlook
The company has raised its guidance for Industrial free cash flow for 2021 which is expected to come in the range of $3.5 billion – $5.0 billion against its earlier predicted range of $2.5 billion – $4.5 billion. However, it has maintained its outlook for its Industrial revenues that are expected to grow organically in the low-single-digit range whereas its adjusted Industrial profit margin is estimated to increase by 250-plus basis points organically. Further, the company has retained its guidance on its adjusted earnings per share for 2021 between $0.15 to $0.25.
Valuation Methodology: EV/EBITDA Based Relative Valuation (Illustrative)
Stock Recommendation
The stock declined by ~4.46% in 3 months. It has made a 52-week low and high of $48.4 and $115.32, respectively.
The stock has been valued using EV/EBITDA multiple-based illustrative relative valuation and the target price so arrived reflects a fall of low double-digit (in % terms). A slight discount has been applied to EV/EBITDA Multiple (NTM) (Peer Median) considering its negative net margin at 3.1% compared to the Industry Median at 6.0% along with its higher debt to equity ratio that stood at 1.90x in Q2FY21 compared to the Industry Median at 1.13x and the longer cash conversion cycle at 115.0 Days in Q2FY21 versus the Industry Median at 89.6 days.
Considering the aforementioned factors and the associated business risks, we advise the investors to book profit on the stock. Thus, we give a “Sell” rating on the stock at the current market price of $106.94 per share (US Time: 10:08 AM) on 30th September 2021.
Technical Overview:
Chart:
Source: REFINITIV, Purple Color Line Reflects RSI (14-Period)
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.
Disclaimer
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