J.P. Morgan cut its 12-month price target on General Electric to just $6 a share on Friday, the lowest on Wall Street.
“The outcome of GE results was worse than expected on almost all fronts,” J.P. Morgan’s Stephen Tusa said of the company’s third quarter earnings. “While liquidity is certainly debatable, we believe this is not really about liquidity, it’s about a deterioration in run rate fundamentals.”
GE reported profits on Oct. 30 which were sharply below Wall Street forecasts. Moreover, GE slashed its quarterly dividend to a penny a share in a dramatic move under new Chairman and CEO Larry Culp. While the dividend cut will free up cash for GE, the overall results gave J.P. Morgan confidence to cut to $6 a share “based on clarity of the new numbers,” Tusa said.
“$6 share price seems negative but not the worst case scenario,” Tusa said. “While hard to imagine two years ago, and even harder to imagine a mere two months ago, the cuts to the model, and generous approach to 2020, using a sector average multiple, results in a stock value of $6.”
GE shares fell 3.1 percent in premarket trading.
“While the stock is down ~70% from the peak of $30, this move still does not sufficiently reflect the fundamental facts, in our view,” Tusa said.