What happened
For the second time in a week -- but the first time this year -- General Electric (GE 8.28%) shares are soaring, closing Wednesday trading up 6.3% after rising as much as 8.1% earlier in the day.
But once again, there appears to be little reason for the stock to be rising.
GE's business still looks broken. It'll take more than a rebounding stock price to fix it. Image source: Getty Images.
So what
No major news of note concerning General Electric stock came out today. In fact, casting about for a reason to explain the shares' rise, Marketwatch reporters were left with no other explanation than the one I pointed to earlier last month, noting that "since longtime GE bear analyst Stephen Tusa at J.P. Morgan upgraded the stock Dec. 13, the stock has rallied 12.4%."
It seems that the opinion of market experts is that GE stock is simply "bounc[ing] off last month's 9 1/2-year low." Or, simply put, GE stock is going up ... because it's already gone down so much there's really no place left to go but up.
Now what
I don't buy that argument, however.
Is GE stock down a lot? Sure it is. Even after two big bounces in the space of a week, GE shares still sell for less than half what they cost a year ago. And yet, the fact remains: This is a company with a $70 billion market cap (that just happens to cost only $8-and-change a share), carrying $115 billion in debt.
GE's not earning profits. Its free cash flow is negative (according to data from S&P Global Market Intelligence). And to top it all off, GE's sales were down last quarter -- so things are getting worse, not better.
If GE were any other stock than GE, the idea that a stock in these dire straits couldn't go down any more would be patently ridiculous. There's still a lot of room to go between here and zero.
Check out the latest GE earnings call transcript.
