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Why General Electric Stock Is Rebounding Today

By Matthew DiLallo – Updated Dec 13, 2018 at 11:34AM

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Investors in the beleaguered industrial giant received lots of good news.

What happened

Shares of GE (GE -0.18%) had rallied more than 10% by 10:30 a.m. EST on Thursday after the industrial giant announced plans to create a company focused on the Industrial Internet of Things (IIoT). On top of that, GE sold a stake in one of its businesses, and J.P. Morgan, which had been bearish on the company, upgraded its stock.

So what

GE will establish an independently run company to expand its leadership in the IIoT market. The new GE-owned entity will bring together several of the company's digital offerings that currently generate $1.2 billion in revenue. GE aims to create a company that can focus on capturing opportunities in the IIoT market, which is expected to expand at a fast pace over the next few years.

A dollar bill folded as an arrow that goes down but them back up higher.

Image source: Getty Images.

In addition, GE announced that it was selling a majority stake in ServiceMax, a provider of cloud-based software productivity tools for field service technicians. The company is selling all but 10% of the business to a private equity fund to accelerate ServiceMax's growth initiatives. The deal will also provide GE with some cash to improve its financial profile.

And J.P. Morgan raised its rating on GE's stock from sell to hold, while setting a $6 price target. The bank had been a longtime GE bear, downgrading the stock more than two-and-a-half years ago on myriad concerns. Now, the bank sees a more balanced risk-reward ratio at the stock's current levels.

Now what

GE continues to take steps to improve its financial profile and its business prospects, which analysts believe are long-term positives. But with a mountain of debt to address, the company still has problems to overcome. Because of that, GE's stock will likely remain volatile until it shores up its finances and gets its operations back on track.

Matthew DiLallo owns shares of General Electric. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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