Buying a stock with growing pains is one thing, but buying a stock with survival issues is another. Maybe labeling General Electric (GE) as a survival case is a bit extreme, but I haven't been able to get behind the recent love affair for this name. Granted, my caution has caused me to miss the recent run in the stock, so my thoughts come with a great big asterisk.
What General Electric has been proficient at doing thus far is selling off its pieces. Unfortunately, that is still about survival. Buyers know GE needs to shed pieces which means GE isn't dealing from a position of power. Tell me the last time you saw someone dealing from a position of need or weakness that commanded above market prices. Heck, half the time they can't obtain market prices.
I understand the market is a forward pricing mechanism, but the optimism around GE for the past three months has even outweighed the market. I can't figure out whether it was bragging rights, ego, nostalgia, or true belief that the GE train was going to turn on a dime. The market has erased two-thirds of the company's value over the past two years, but with sales over $100 billion and a market cap near $100 billion, we're still talking about a huge company. Change cannot and will not happen quickly. The amount of debt is still cumbersome and free cash flow continues to be an issue.
Where does this one fit? Growth? Value? Blend?
I'd say none of them.
It falls in the category of hope. We hope the ump-teenth iteration after as many turnaround plans and new CEOs will be the solution.
The gap lower to start the week is painful from a technical perspective. GE was teetering on a $10 support level and suddenly almost every buyer from the past two plus months is underwater. There may be a handful of folks from the March dip that aren't, but they were likely the first to sell. Get out before a gain turns into a loss, the ultimate sin of a trader. This is also the first time shares have traded below the 50-day simple moving average (SMA) since the first two weeks of 2019. Momentum and trend will now give way to the bears. One has to give real consideration to a February gap fill. While we came close in early March, the gap never quite filled.
I'm looking at $9.20 as first support with $8.80 as the next level. I suspect this will become the new trading range soon with $9.50 acting as a high level and $8.20 as possible downside. I've said it before and I'll stick to it: there's nothing compelling about GE right now.