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Company: General Electric (NYSE:GE)

Options trade: GE Jan 18 '19 $18 Call

Current Underlying Stock Price: $14.00



    General Electric’s stock price has dipped significantly as of recently, losing 50% of it’s January 2017 value. In roughly one year the stock has plummeted over 50% from $30 per share down to just below $15 per share. As the firm continues to struggle and with GE management in overhaul, they have reduced the size of their board from 17 members to 12. Furthermore, they have opted to oust former long standing members in favor of three new members, including top executives from American Airlines and Danaher Corporation, two companies that have experienced steady growth for the past few years.1 They have also become proactive in guiding investor outlook by giving more color into the firm’s financial strength and lowering the 2018 earnings forecast. Additionally, they have announced a reduction in their dividend payouts by 50%. While the immediate effect on the stock price was negative, analysts believe that this decision will help the stock in the long run because the new target dividend percentage is much more achievable and therefore will offer the potential of strong and stable dividend payouts in future years.2 The company has performed well recently, eliminating $1.7B in structural costs and achieving operating cash flow of $9.7B, both figures much better than the goals the company had previously set. Moreover, CEO, John L. Flannery, plans to sell or exit from underperforming businesses valued at $20 billion to net the company between $12 billion and $15 billion in cash by the end of 2019.3  

   There has been a change in analyst outlook with a shift towards positive growth. Analysts, such as Nick Heymann from William Blair is even suggesting that GE maybe looking at a rise in stock price over 50% in the next year. The overall consensus, however is that, the stock has been oversold with an relative strength value of 29.87.

     I believe that just about everyone who wanted to sell their GE stock has already dipped and given up hope, but investors are now looking at the historically low, and attractive stock price as an opportunity to buy into the blue-chip giant. I think buying a call for a year out would prove profitable as the stock reaches back up towards the $30 per share value it was at a year ago. The stock is currently testing a bottom at around $13.93 and if the most optimal time to purchase would be if the stock price fails to cross below tat resistance point.

    Analysts believe that GE could possibly being a strong investment, and are providing a twelve month forecasted price range from $17 per share to high estimate of $28 per share. As GE continues to bolster profitable divisions, remove cost centers, and revamp management, I believe that there is a potentially for GE become the industry juggernaut it once was.




General Electric (NYSE:GE)





Tenor/Maturity (days)

Jan19 (323 days)

Volatility (% Implied)





Buy Call




Sources List:

  1. https://www.wsj.com/articles/ge-revamps-board-adds-accounting-expert-former-ceos-of-danaher-american-airlines-1519647911?mod=yahoo_hs&yptr=yahoo

  2. https://seekingalpha.com/article/4151252-general-electrics-restated-earnings-mean-dividend-investors?page=2

  3. https://www.marketwatch.com/story/ges-stock-may-rise-50-this-year-says-analyst-whos-covered-the-company-since-1983-2018-03-01