Will General Electric Stock Continue To Rise After An 8% Move Last Week?

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[Updated: Sep 30, 2021] GE Stock Rise

Last month we discussed that General Electric (NYSE:GE) stock will likely see higher levels following a 4% fall in a week following the concerns over rising raw material costs after its Q2 earnings release. GE stock has moved 4% higher since then to levels of around $106 currently. The company’s stock has seen a rise of 7.9% this past week, and given this movement, the predicted return for GE is 2.1% over the next one month, based on Trefis Machine Learning analysis. You can test the answer and many other combinations on the Trefis Machine Learning Engine to test General Electric stock price forecast. You can test the chance of recovery over different time intervals of a quarter, month, or even just 1 day!

The recent rise can be attributed to the company’s announcement of BK Medical acquisition of $1.5 billion to strengthen the ultrasound portfolio of its healthcare business. A few years back GE was planning to sell its healthcare business to reduce its debt, but now with this acquisition, it appears that the company is focusing on strengthening this business, and it is unlikely to be sold. The healthcare business has seen better growth over the recent past compared to its other segments, and this deal will further strengthen this segment with expected improvement in margins as well as revenue growth. With recent restructuring initiatives, including the selling of GE Capital Aviation Services to Aercap, this has meant that the company’s liquidity position has now improved. As such, the recent move to acquire BK Medical has boded well with the investors, resulting in the stock price appreciation.

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While GE stock may rise around 2% over the next month, based on its historical performance, if you are considering GE stock as an investment over a longer time frame, you can explore our forecast for General Electric valuation of $117 per share, implying over 20% premium to the current levels.

 

[Updated: Aug 18, 2021] GE Stock Decline

The stock price of General Electric (NYSE:GE) reached its 52-week high of $115 in the month of May, before a recent sell-off in the stock led to an 11% fall in GE stock to levels of around $102 currently. GE stock is down over 4% over the last five trading sessions. While the company posted an upbeat Q2 performance, there are near-term risks, primarily the rising raw-materials costs due to inflationary pressure, which may impact the overall earnings growth. Furthermore, GE stock has already rallied 2x over the last one year, in hopes of a strong recovery post the pandemic. With rising vaccination rates, there is a rise in the industrial output, as well as an expected rise in air-travel, which will eventually result in increased orders for GE’s aviation business.

Now, after a 4% fall in a week, will GE stock continue its downward trajectory over the coming weeks, or is a recovery in the stock imminent? According to the Trefis Machine Learning Engine, which identifies trends in the company’s stock price using ten years of historical data, returns for GE stock average 7% in the next one-month (twenty-one trading days) period after experiencing an 4% drop over the previous week (five trading days). But how would these numbers change if you are interested in holding GE stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test General Electric stock chances of a rise after a fall. You can test the chance of recovery over different time intervals of a quarter, month, or even just 1 day!

MACHINE LEARNING ENGINE – try it yourself:

The returns change dramatically if GE stock moved by -5% over five trading days. In such a scenario, over the next twenty-one trading days GE stock moves an average of -1%, with only a 49% probability of a positive return over this period.

Some Fun Scenarios, FAQs & Making Sense of General Electric Stock Movements:

Question 1: Is the average return for General Electric stock higher after a drop?

Answer: Consider two situations,

Case 1: General Electric stock drops by -5% or more in a week

Case 2: General Electric stock rises by 5% or more in a week

Is the average return for General Electric stock higher over the subsequent month after Case 1 or Case 2?

GE stock fares slightly better after Case 1, with an average return of 2.7% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an average return of 2.3% for Case 2.

In comparison, the S&P 500 has an average return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the average return for the S&P 500 after a fall or rise.

Try the Trefis machine learning engine above to see for yourself how General Electric stock is likely to behave after any specific gain or loss over a period.

Question 2: Does patience pay?

Answer: If you buy and hold General Electric stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!

For GE stock, the returns over the next N days after a -5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:

You can try the engine to see what this table looks like for General Electric after a larger loss over the last week, month, or quarter.

Question 3: What about the average return after a rise if you wait for a while?

Answer: The average return after a rise is understandably lower than after a fall as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks – although GE stock appears to be an exception to this general observation.

It’s pretty powerful to test the trend for yourself for General Electric stock by changing the inputs in the charts above.

While GE stock may rise 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 3M vs. D R Horton.

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