Is General Electric Stock Headed Lower After The AerCap Deal?

by Trefis Team
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The stock price of General Electric (NYSE: GE) has seen a 6% drop over the last five trading days, after the company announced its plans to sell its GE Capital Aviation Services business, and bring the remaining debt and assets of GE Capital to its industrial business. The announcement came in on March 10, 2021, sending the GE stock down over 10%. However, some of the analysts defended the company’s move, and the stock rose over 6% in a single trading session yesterday.

Looking at the recent decline, the 6% drop for GE stock over the last five days compares with a 4% gain seen in the broader S&P 500 index. Now, is GE stock poised to drop further? It looks that way. While the sale of the GE Capital Aviation Services is surely a positive for the company and it would garner $24 billion cash for GE. The problem is moving the remaining GE Capital’s debt to the industrial business. The total debt for GE Capital currently stands at $50 billion, and after this transaction, over $20 billion debt of GE Capital will be part of GE’s industrial balance sheet, which already has an existing debt of $25 billion. The substantially higher leverage could be a concern for GE. Furthermore, based on our machine learning analysis of trends in the stock price over the last few years, we believe that there is a 55% chance of a drop in GE stock over the next month (twenty-one trading days). See our analysis on General Electric Stock Chances of Rise for more details. Curious about the possibility of rising over the next quarter? Check out the GE Stock AI Dashboard: Chances Of Rise And Fall for a variety of scenarios on how GE stock could move.

Five Days: GE -5.8%, vs. S&P500 4.2%; Underperformed market

(7% likelihood event)

  • General Electric stock declined 5.8% over a five day trading period ending 3/15/2021, compared to a broader market (S&P500) rise of 4.2%
  • A change of -5.8% or more over five trading days is a 7% likelihood event, which has occurred 175 times out of 2516 in the last ten years.

Ten Days: GE 1.8%, vs. S&P500 2.1%; Underperformed market

(5% likelihood event)

  • General Electric stock rose 1.8% over the last ten trading days (two weeks), compared to broader market (S&P500) rise of 2.1%
  • A change of 1.8% or more over ten trading days is a 5% likelihood event, which has occurred 116 times out of 2500 in the last ten years.

Twenty-One Days: GE 16%, vs. S&P500 1.7%; Outperformed market

(10% likelihood event)

  • General Electric stock rose 16% the last twenty-one trading days (one month), compared to broader market (S&P500) rise of 1.7%
  • A change of 16% or more over twenty-one trading days is a 10% likelihood event, which has occurred 245 times out of 2458 in the last ten years
While GE stock may see a drop in the near term, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Portland General Electric  vs. Lockheed Martin.

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