It's an understatement to say that onetime U.S. industrial titan General Electric (GE 2.28%) has fallen out of favor with investors in recent years. But the beaten-down stock has a new bull in Citigroup (C 1.52%) analyst Andrew Kaplowitz, who Friday resumed the bank's coverage of the stock with a buy recommendation and a $17 per share price target.
At General Electric's most recent closing stock price, that level would represent 28% upside if achieved.
The prognosticator wrote in a note to clients that:
With evidence of improving execution across much of GE's portfolio and given our expectation of gradual but likely accelerating recovery in GE's Aviation business particularly in [the second half of 2021] and beyond, we see material upside in GE's shares as demand recovery and operational improvements support growing and more consistent/sustainable cash flow generation in '21 and beyond.
Since falling on hard times, General Electric has attempted to streamline its once-sprawling collection of businesses to become a leaner company with a tighter focus.
Righting such a massive ship is no easy or quick task, however. The company's first-quarter results, published at the end of April, indicate that it's still struggling to meet this ambition. Even though General Electric beat the somewhat diminished expectations of the analysts following it, the company's total revenue fell by 12% on a year-over-year basis. Non-GAAP (adjusted) net profit fared worse, experiencing a 20% tumble.
Yet Kaplowitz opined that General Electric's efforts to slim down and complete its recovery are "largely on-track." He pointed to the company's success in fighting operating margin declines in its big aviation business as an example of this.
"More broadly, our sense is that GE's overall focus on simplification of its portfolio and operations continues to gain traction throughout the company," the analyst added.