The Next Big Step for General Electric (GE) Stock
General Electric (GE) is hoping to turn a corner in the New Year.
The company last week confidentially filed paperwork for an IPO of GE Healthcare, according to various news outlets. The stock surged on the news, as the spinoff could be valued as high as $60 billion and help offload debt as the company continues its effort to deleverage. Investors have grown wary over GE’s enormous debt over the past year, sending the stock plummeting more than 60% since the beginning of the year. As the company continues its restructuring process, this could be its biggest move yet.
While GE is best known for its Power, Aviation and Capital segments, its Healthcare unit is extremely large. The segment is involved in medical research and device manufacturing, including CT machines, Ultrasound machines and respiratory care systems, and posted revenue of $19.1 billion last year (about 16% of total revenue).
Blogger Daniel Jones sees this move as GE’s “next big step.” Jones says GE is “going through a really exciting period where management is working hard to create value for the firm.” He concedes that investors probably don’t feel this way – given how much the company has plummeted over the past year – but “by splitting up the firm like this, the company has the opportunity to not only restructure its asset base and streamline core operations, it has the chance to let certain assets that would benefit from independent management teams focus on optimizing their own assets.”
While investors agree that GE’s stock has been a disaster, analysts are actually cautiously optimistic over the next 12 months. TipRanks analysis of 17 analyst ratings on the stock shows a Moderate Buy consensus, breaking down into 7 Buy, 9 Hold and 1 Sell ratings in the last three months. TipRanks shows that the average analyst price target is $10.79, which represents about 56% upside from current levels. (See GE’s price targets and analyst ratings on TipRanks)