Please ensure Javascript is enabled for purposes of website accessibility

Why GE Shares Jumped Today

By Howard Smith – Updated Oct 9, 2020 at 12:56PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A new buy recommendation and price target imply significant upside for the stock.

What happened

After jumping more than 6% this morning, shares in General Electric (GE 0.31%) are up 3.5% as of 12:15 p.m. EDT. A Goldman Sachs analyst sees a path for the stock to reach $10 per share, a 50% increase over Thursday's closing price.

So what

Goldman analyst Joe Ritchie thinks the company has set itself up for success as its businesses fully recover from impacts of the COVID-19 pandemic. He believes the strategic turnaround being engineered by CEO Larry Culp will soon pay off. 

Offshore wind turbines

Image source: Getty Images.

Though the company said it expects its cash flow to remain negative for 2020, Ritchie said he is "simply making the call that as GE's higher margin businesses recover, FCF [free cash flow] will improve materially."

Now what

Some of the hardest-hit sectors from the pandemic included GE businesses such as aviation and energy. But the company has worked to deleverage with the sales of its biopharma and lighting businesses. It also has plans to exit its equity ownership position in energy firm Baker Hughes

While its aviation business is largely at the mercy of a recovery in the aerospace and airline industry, GE has taken the initiative to pivot its energy business. The company recently said that it would cease production of new coal power equipment and instead focus on renewable energy. 

It recently announced new contracts for wind turbines for what will be the world's largest offshore wind farm, as well as a project that will provide the energy equivalent to power 160,000 homes. As the economy fully recovers, GE should be in a better position to return to positive free cash flow and profitability. 

Howard Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

General Electric Stock Quote
General Electric
GE
$88.14 (0.31%) $0.27

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
356%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.