General Electric (GE) Has Near-Term Downside Risk, Says Deutsche Bank

Deutsche Bank maintained a Hold rating on General Electric (NYSE: GE) with a price target of $28. Analyst John G. Inch warned of near-term downside risks following its Synchrony Financial (NYSE: SYF) spin-off.

"We believe GE’s shares could correct lower near term as the SYF split off transaction nears completion, among other factors which we outline in this report. In general, we continue to believe GE is on the right track strategically, while significant expected share repurchase next year should still provide an important EPS growth catalyst and share price buffer," said Inch.

"Still, with the industrial economy currently deteriorating, the risks for GE appear to be rising. In turn, we believe too many investors have been willing to look too far into the future (ie, 2018+) as a basis for their bullish GE stance despite potentially rising risks to near term fundamentals coupled with ongoing execution risks toward successfully selling off GE Capital’s overseas assets," added the analyst.

Inch added, "With the SYF deal already in our forecast numbers and the transaction now nearing completion, the end of this event could bring about something of a share price “unwind” for GE considering 1. To the extent the SYF deal is oversubscribed, this could create an overhang of GE owners who purchased GE to buy SYF exclusively, 2. Momentum investors who purchased GE on the premise of SYF as a positive catalyst subsequently sell the stock post the SYF transaction completion, and 3. GE’s passive index weighting prospectively declines along with SYF being added to the S&P 500."

For an analyst ratings summary and ratings history on General Electric click here. For more ratings news on General Electric click here.

Shares of General Electric closed at $30.28 yesterday.

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