The official call of Goldman Sachs on General Electric is to hold on dumping it as GE may not be out for the count just yet.
“We view GE as the ultimate self-help, re-opening levered story in Industrials,” said Goldman Sachs analyst Joe Ritchie in a new research note on Tuesday. The analyst, confident that the stock will rise, associated a $16 price target on GE’s stock. This represents about a 22% upside from where the stock price currently rests.
An upside of 1.3% was seen in GE’s stock early afternoon trading Tuesday. The stock is doing better than the stocks of Caterpillar (18% gain) and 3M (13% gain) and is well-positioned at a 21% rise.
According to Goldman’s Ritchie, GE’s stock may have a much higher upside depending upon the company’s ability to continually repair its finances under CEO Larry Culp.
“We view the next chapter for GE, beyond our $16 price target, as being driven by +double-digit free cash flow margins (or $1/share in free cash flow), which would imply a $20+ valuation,” Ritchie posited.
For 2021, an estimate made by Ritchie says that GE will generate $4.2 billion in free cash flow. The company’s guidance has voiced for a free cash flow in the range of $2.5 billion to $4.5 billion. Adjusted earnings are forecast by GE to come in at $0.15 to $0.25 for 2021.
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