GE shares tumble as J.P. Morgan analyst downgrades, cuts PT further

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(Reuters) – Shares of General Electric Co fell more than 7 percent on Monday after J.P. Morgan’s Stephen Tusa, a top-rated analyst, downgraded the stock and further cut his price target to a Street-low of $5.

FILE PHOTO: The logo of U.S. conglomerate General Electric is pictured at the company’s site of its energy branch in Belfort, France, February 5, 2019. REUTERS/Vincent Kessler/File Photo

Tusa, a long-time bear on the stock, cited significant liabilities and little free cash flow to support the company’s ongoing reset and cut his rating to “underweight” from “neutral”, an about-turn from an upgrade in December.

“Investors are underestimating severity of challenges and underlying risks at GE and overestimating value of small positives,” Tusa wrote in a note.

Tusa said investors are “significantly over projecting” the bounce in free cash flow and sees weakness in the company’s power and renewables unit.

Listing the challenges faced by the industrial conglomerate, Tusa said GE Capital Services unit is likely to consume cash for the foreseeable future, with aviation fundamentals weaker than what meets the eye.

GE could lose as much as $2 billion in cash from its industrial businesses in 2019, Chief Executive Officer Larry Culp said in March,