GE Stock to Gain 50%: William Blair

Shares of Boston-based industrial conglomerate General Electric Co. (GE) jumped nearly 3.3% in intraday trading on Monday following an upbeat note from analysts who expect the beaten-down stock to gain on factors including rising oil prices,three new company directors and growth in GE's aviation and health care businesses. Monday's gains trimmed a 17.4% year-to-date (YTD) decline, compared to the S&P 500 Index's 1.8% gain in the period. (See also: GE ‘Brushing Things Under the Rug’: Deutsche Bank.)

William Blair analyst Nick Heymann, who has covered the company since 1983, on Monday made the case for a GE comeback in 2018. In a note to clients, Heymann, who worked for GE as a financial analyst and auditor from 1978 to 1981, recommended investors buy shares of the DJIA component company on the dip. He expects the stock to rise as much as 53% over the next 12 months to reach $20 to $22. 

In November, GE halved its dividend and cut its 2018 earnings forecast. Following the major sell-off, the analyst sees limited downside for the stock. 

Shares Have 'Fallen Too Far'

Heymann, who rates GE at outperform, wrote that despite hurdles facing the company, GE's shares have fallen too far. He sees the firm's new leader, John L. Flannery, as cut out to champion a turnaround following former CEO Jeff Immelt's forced resignation last year. 

Recovering oil prices should also work to boost Baker Hughes, the oil and gas equipment and services business in which GE owns a 62.5% stake. He does not see the company selling its aviation and health care units, which are expected to account for two-thirds of earnings and free cash flow in 2018, after exceeding earnings expectations in the fourth quarter. 

Despite bearishness regarding recently announced shareholder and bondholder lawsuits, the analyst indicated that they can be resolved without a material impact on the company's financials, while at the same time the firm should see pension obligations shrink. The Blair analyst added that GE is moving faster than expected with its efforts to generate cash flow and shed assets, as reported by website The Street. He foresees no further dividend cut or issuance of shares to raise capital. (See also: GE May Be Dropped From Dow: Deutsche Bank.)