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Why General Electric Stock Gave Back Its Gains Today

By Rich Smith - Jan 27, 2021 at 4:12PM

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The market's nervous. It shouldn't be nervous about GE.

What happened

Tuesday was a good day for General Electric (GE 0.28%). Today is looking somewhat worse. After rising $0.30 in share price after the company released its fourth-quarter earnings, GE stock has now given back all its gains and a little bit more, and is down 3.4% as we begin the final half hour of trading.

So what

So what happened to GE?

Yesterday, the company reported slightly better-than-expected revenue, but slightly worse-than-expected earnings ($0.08 per share, adjusted). Such "mixed" news might ordinarily not have moved the stock price much, but GE also reported generating twice as much cash as it had promised -- $4.4 billion -- and that got investors very excited that the company's turnaround might be progressing faster than expected.

Blackboard drawing of stock chart arrow going up being erased and pointing back down

Image source: Getty Images.

Now what

Today, investors seem to be rethinking their optimism about that in the face of a broad market sell-off. But here's the thing:

However nervous investors are about the market in general, and where it might be headed next, General Electric's numbers are already in the books. They're facts. It's a fact that GE has stopped burning cash, and begun generating it instead. And that fact lends credence to GE's prediction that this year, it will generate anywhere from $2.5 billion to $4.5 billion more.

That prediction led one analyst, Morgan Stanley, to raise its price target on GE stock to $13 this morning, calling GE's prediction conservative (i.e., GE might even generate more cash than it's promising). At the same time, GE's underpromising and then overdelivering in Q4 elicited a comment from Citigroup to the effect that there's "growing evidence" that GE is back on track, and able to deliver on its promises.

So long as it keeps doing that, I think GE's stock is going to do just fine -- and I'd go so far as to say GE stock will probably recover its losses of Tuesday in relatively short order.

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