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Why General Electric, PG&E, and Yelp Slumped Today

By Dan Caplinger - Nov 9, 2018 at 4:45PM

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Liquidity worries, fire fears, and short-term disruptions were among the issues weighing on these companies' stock prices.

Friday was a down day on Wall Street, with substantial declines for major  benchmark indexes -- though most still finished higher for the week. The downbeat mood stemmed from a combination of geopolitical and macroeconomic concerns, as market participants tried to weigh how the likely scenarios in Washington and the global economy over the next couple of years might affect various industries.

Leading the market lower were some stocks that suffered more individual bad news. General Electric (GE 4.70%), PG&E (PCG 4.70%), and Yelp (YELP 4.80%) were among the worst performers on the day. Below, we'll look more closely at these companies to explain why their stocks did so poorly.

GE has further to fall, analysts say

General Electric's share price dropped 5%, adding to its previous huge losses in 2018, as prominent stock analysts weighed in against the industrial conglomerate. JPMorgan cut its price target on GE by 40% to just $6 per share, and reiterated its underweight rating on the stock. Among the factors leading to that negative outlook were GE's dividend cut and the downgrading of its credit rating by Moody's from A2 to Baa1. General Electric was quick to deny that it had any liquidity problems, but until it shows its growth strategy is working again, many investors will likely continue to shy away, despite GE stock having fallen to its least-expensive price in eight years.

Worker on top of a wind turbine, with view of other turbines and landscape nearby.

Image source: General Electric.

PG&E gets burned one more time

PG&E took a 16% share price hit after it once again had to respond to wildfires in California. The Golden State utility company had already told some of its customers to prepare for a potential public safety power shutoff as a proactive measure due to dangerous fire conditions, and it announced earlier this week that it would spend $6 billion on wildfire safety between now and 2023. Yet with authorities already looking at the source of the ongoing wildfires in the state -- which have caused several deaths already -- shareholders worry that PG&E might once again find itself held liable, and on the hook for damages. That was enough to wipe out the utility's share-price gains for the year, and absent government intervention, an actual adverse decision could levy a toll on the company's bottom line.

Yelp needs help

Finally, Yelp finished down sharply, off 26% on the day. The social media review site reported third-quarter revenue gains that weren't quite as strong as most of those following the stock had expected to see, and several stock analyst companies weighed in against Yelp and its review-based business model. CEO Jeremy Stoppelman tried to argue that Yelp's business-model shift toward less rigid advertising terms will eventually pay off with greater revenue and profits, but for now, the move leaves it vulnerable to some short-term disruptions. Shareholders didn't seem convinced about the temporary nature of Yelp's problems, and the company will likely need to provide more reassurance in order to restore investor confidence in the stock.

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Stocks Mentioned

General Electric Company Stock Quote
General Electric Company
$67.08 (4.70%) $3.01
Yelp Inc. Stock Quote
Yelp Inc.
$30.33 (4.80%) $1.39
PG&E Corporation Stock Quote
PG&E Corporation
$10.25 (4.70%) $0.46

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