If GE drops to $ 10 ... I'm buying 1,000!

JPMorgan analysts see GE's earnings forecast coming in 'a step lower.'


JPMorgan wrote in a note that it thinks General Electric's earnings per share will ultimately come "a step lower," as the $1 estimate isn't realistic. According to JPMorgan, the figure doesn't include continued restructuring or asset sales that will go to the company's balance sheet instead of its shareholders. "GE isn't a safety stock in a more volatile market," JPMorgan wrote. There is "zero" potential from cost cuts at the company and any possible breakup of the firm would result in "dis-synergies." Analysts cut their price target to $11 from $14, representing a 23.8% downside for shares from their closing price Tuesday. JPMorgan's new target is also well below Wall Street's average target price of $17.20, according to FactSet data.
J.P. Morgan Analyst Says GE Is Headed To $11. Here Are 5 Reasons To Ignore His Assertion

  1. First, there was no new negative news. His new $11 target is a huge 20+% decline from his previous $14 target, set only last month. His rationale, like the flawed Barron’s article, is simply a regurgitation of what everyone already knows and what he has already said. (See “General Electric: Barron's Shouts 'Beware!' That Settles It - Time To Buy” for explanation about the Barron’s article.)
  2. Second, General Electric and its stock are in an area where contrarian investors and fund managers see potential. However, analysts, value investors and value fund managers see only risk. The value gauge to contrarians is high “negativity,” not some low fundamental ratio or two. A downtrend propelled by negativity reverses when a company and stock are at their worst. It can then rise when contrarian buyers have replaced selling value investors. That is where GE is now.
  3. Third, a good analyst, while important to the investment process, is not necessarily a good manager. Investment managers depend on the information that analysts evaluate, but then the managers must make the decisions of why, what, when, and where (price) to buy, sell, pass or hold. Tusa’s arguments and visions cross over into manager territory.
  4. Fourth, analysts are not doctors or lawyers – they are Wall Streeters. Therefore, we must always question what we hear/read. Their thoughts and suggestions can be sincere, but they do work in a fast moving, action-oriented environment that can get into an emotional mindset.
  5. Fifth, Wall Streeters sometimes rush things along too fast. Tusa’s timing, ahead of these three events (including his own firm’s conference the next day) means any relevant information they provide are not in the now widely publicized $11 price. He can certainly go lower, but what if $12 or $13 or staying at $14 appears to be supported?

Comment: Meanwhile .... Warren Buffet is in the hunt 

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