The stock cratered this morning after Stephen Tusa of JP Morgan cut his rating back to sell, setting a new price target of $5, which is almost 50% below current levels. This was never a value stock and people were too optimistic about a potential recovery. GE’s debt problems are severe and its cash flows are basically zero. That’s why Tusa had to revise his outlook. When he upgraded the stock to neutral back in December, the stock soared 38% on pure smoke.
The truth is, GE is an emblem of crony capitalism and corporate greed. For years GE executives championed deregulation and lobbied their way to government handouts and subsidies while doing everything in their power not to pay taxes. At the same time, they relied on leverage to generate profits, paid themselves obscene bonuses, and laid off thousands of workers. But the day of reckoning is finally here. If there’s a recession on the horizon this could very well be a Lehman moment for GE.