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Shares of General Electric Co. pulled a sharp intraday U-turn Thursday to trade in negative territory, as they once again failed to sustain gains above a chart resistance level even as Wall Street analysts praised the industrial conglomerate’s blowout earnings report.
The stock
GE,
rose as much as 4.3%to an intraday high of $7.74 in morning trading, before reversing course to fall 0.2% at $7.41 in afternoon trading. For the second day in a row, and for the third time in five sessions, the stock climbed above the 200-day moving average intraday, but failed to close above it.
The last time the stock closed above the 200-day moving average was March 4, just as the COVID-19 crisis took hold. On Thursday, the 200-DMA extended to $7.67, according to FactSet.
The 200-day moving average (200-DMA) is a closely watched technical indicator that many Wall Street technicians use as a guide to the long-term trend. Many also use it as a dividing line between longer-term bull and bear markets. Read more about the 200-DMA.
On Wednesday, the stock ran up as much as 10.7% intraday to $7.86 after GE reported a surprise profit and positive free cash flow, above the 200-DMA at the time of $7.69, but pulled back in afternoon trading to close up 4.5% at $7.42.
Don’t miss: GE stock jumps as investors cheer surprise adjusted profit and positive free cash flow.
On Oct. 23, the stock rose 4.0% to a high of $8.03, above the 200-DMA at the time of $7.76, but reversed to close down 1.2% at $7.63.
FactSet, MarketWatch
Despite the technical headwind, analysts were upbeat about the stock’s outlook in the wake of GE’s surprisingly positive earnings report.
Analyst Nigel Coe at Wolfe Research reiterated the outperform rating he’s had on the stock for the past two years, and raised his price target to $11 from $9. Coe’s price target is now tied with Melius Research’s Scott Davis’s target for the highest of the 20 analysts surveyed by FactSet. That target implies a potential 48.4% rally from current prices.
Wolfe’s Coe said the results, which reflected better-than-expected trends across pretty much every metric that matters, “reframes the narrative” and suggests quality improvement initiatives are starting to show visible improvements.
As a result, “we expect the stock to significantly outperform into year-end,” Coe wrote in a note to clients.
Melius’s Davis said that while the numbers “aren’t pretty,” free cash flow is now positive, liabilities are more manageable and “it would appear that we are past the bottom” of the macro downcycle. “The stock price that was discounting some failure risk, likely has a for more positive bias,” Davis wrote.
Davis said his buy-side clients had not been focusing on GE given its complexity, as the time commitment to understand the company’s issues was too great.
“Each quarter, however, it gets easier with more consistent disclosure, a portfolio that continues to simplify and heavy restructuring largely behind us,” Davis said. “A simpler GE with simple earnings and cash flow dynamic will get valued higher.”
Meanwhile, Deutsche Bank’s Nicole DeBlase kept her rating at neutral, but boosted her GE price target to $9.00 from $6.81.
DeBlase said she would characterize GE’s results as “a step in the right direction towards a turnaround,” as she was particularly impressed with the sequential profit improvements seen in the company’s aviation and power businesses.
In all, 13 of the 20 analysts surveyed by FactSet are bullish on GE, and the rest are neutral; there are no bears. The average price target is now $8.90, which is up 7.0% from the average target of $8.32 at the end of September, and 20.1% above current prices.
The stock has run 18.9% so far this month, while the SPDR Industrial Select Sector exchange-traded fund
XLI,
has slipped 1.3% and the S&P 500 index
SPX,
has lost 1.4%.
