What we witnessed here was the complete evisceration of an American industrial icon. Shares of GE were practically in a death spiral just a few months ago and I still believe the stock will hit single digits by Christmas. Some will say that GE’s aviation and power units are worth more than its current valuation, but things are not that simple anymore. For starters, there is THIS and THIS to think about, not to mention the quality issues that are threatening GE’s brand image. I don’t remember a single instant when GE’s reputation ever came into question. But this year multiple turbine blades experienced mechanical problems. This is yet another red flag in addition to the secular forces that are threatening the company’s existence. You can read more HERE. Then you have the recent credit downgrade, which will make borrowing money way more costly due to GE’s massive debt obligations.
Make no mistake, this is a company with an uncertain future. I don’t even think you can value GE accurately. Nobody can, which is why they call it a value trap. You can be sure that there will be serious cost cutting, plant shutdowns, new partnerships, and dividend cuts. But a new CEO can only do so much. If sales don’t improve, if the macro picture is not favorable, it will be for nothing. The time to think small and fast was years ago. Just ask Kodak and Sears.
That being said, if the stock drops below $8, I might be a buyer.