TERRAY SYLVESTER/Reuters
- General Electric is worth less than $5 per share, JPMorgan said in a note on Monday.
- Analyst Stephen Tusa, who has been bearish on General Electric over the past three years and has proven prescient with his bearish calls, removed his price target on the industrial conglomerate.
- Tusa is now "more negative on GE" heading into the second half of 2020, despite the company beating earnings estimates for the second quarter.
- "We see little equity value here," Tusa said.
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General Electric is worth less than $5 per share, JPMorgan analyst Stephen Tusa said in a note published on Monday.
A drop to $4.99 would represent a 25% decline from Friday's close.
Tusa, who has been bearish on General Electric over the past three years and has become a well-known analyst on the name, said "we are more negative on GE" heading into the second half of 2020, and that he sees "little equity value here," according to the note.
General Electric still has no official earnings guidance, which provides little visibility on the business looking three to six months out, Tusa said.
But General Electric's call for positive free cash flow in 2021, along with a long-term free cash flow target, is keeping other Wall Street analysts "persistently optimistic."
Tusa thinks "the collapse of this forward estimate [free cash flow] curve is coming soon," the note said.
General Electric may not "see normal" until 2024 due to outstanding debt maturities and options resets, Tusa highlighted.
And for General Electric's aviation unit, a COVID-19 vaccine is a "must have for survival, not an upside drive to our well below consensus estimates," Tusa said.
"Our simple math is that with a sector at 17x EBITDA, subtracting the 17x leverage burden here, equity value is below $5 and we are withdrawing our price target," Tusa concluded.
Shares of General Electric rose 0.5% to $6.64 in Monday trades. Shares are down 41% year-to-date.
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