Up 20% In A Month, Will General Electric Stock See More Gains?

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GE
General Electric

General Electric stock (NYSE: GE) has seen a rise of 20% in a month, while it’s down 16% year-to-date. The company reported upbeat Q2 results last month, reiterating its full-year earnings outlook with a recovery in the aviation industry. Boeing recently delivered its 787 aircraft to American Airlines. This ends a gap of nearly two years since the deliveries were put on hold due to manufacturing flaws. A rise in production of 787 will aid GE’s aviation business, given it uses the GEnx engine developed by GE. These factors, clubbed with a recovery in the broader markets, with the S&P 500 index rising 9% in a month, aided GE’s stock price growth.

In our view, despite the recent rise, there’s still room for growth in GE stock. We estimate General Electric’s valuation to be $93 per share, reflecting a 15% upside from its current market price of around $80. Our valuation represents a forward P/E ratio of about 36x based on our earnings forecast of $2.60 on a per-share and adjusted basis for full-year 2022. At its current levels, GE stock is trading at 31x forward earnings, compared to the last two-year average of 36x, implying there is more room for growth.

But what about the near term?

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Now that GE stock has seen a rise of 20% in a month, will it continue its upward trajectory, or is a fall imminent? Going by historical performance, there is a higher chance of a rise for GE stock over the next month. A move of 20% in a month for GE has occurred 88 times in the past ten years. Of those, 54 instances resulted in GE stock rising over the subsequent one-month period (twenty-one trading days). This historical pattern reflects 54 out of 88, or about a 61% chance of a rise in GE stock over the next month. See our analysis of General Electric Stock Chance of Rise for more details.

Calculation of ‘Event Probability‘ and ‘Chance of Rise‘ using the last ten years’ data

  • After moving 4% or more over five days, the stock rose on 50% of the occasions in the next five days.
  • After moving 7% or more over ten days, the stock rose on 49% of the occasions in the next ten days.
  • After moving 20% or more over a twenty-one-day period, the stock rose on 61% of the occasions in the next twenty-one days.

This pattern suggests nearly an equal chance of a rise or a fall in GE stock over the next five and ten days but a higher chance of a rise in the next twenty-one days.

General Electric (GE) Return (Recent) Comparison With Peers

  • Five-Day Return: GE highest at 3.6%; MMM lowest at -1.3%
  • Ten-Day Return: GE highest at 6.9%; RTX lowest at 0.5%
  • Twenty-One Day Return: GE highest at 19.7%; RTX lowest at 1.2%

While GE stock looks like it has more room for growth, it is helpful to see how General Electric’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis 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 Honeywell vs. Amkor Technology.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Aug 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 GE Return 7% -16% -67%
 S&P 500 Return 4% -10% 91%
 Trefis Multi-Strategy Portfolio 5% -9% 258%

[1] Month-to-date and year-to-date as of 8/18/2022
[2] Cumulative total returns since the end of 2016

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