General Electric Looks Set For Another Breakout

Shares of the global conglomerate company General Electric (GE) are up 8% following a 13% plunge early last week. The company has gained more than 113% in market value since September last year making it one of the best mega-cap performers over the same period.

Despite the company’s recent pullback in stock price, General Electric looks set for another breakout which could see its stock price hit a new 3-year high. It hit a high of $18.76 at the start of 2018.

General Electric rose momentarily to trade at $14.42 at the start of this month but has since pulled back to settle at around $13.35. A stretch towards the $15.00 level will put it above $14.97, which it last hit in May 2018.

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At the current price of $13.35, General Electric is trading at a trailing price-earnings ratio of just 22.32, which is reasonably attractive for such a quality stock. General Electric’s earnings are expected to grow rapidly over the next five years. Its PEG ratio (5-years expected) of 0.17 makes it one of the top-quality stocks to watch going into the second quarter of the calendar year. 

A look at growth catalysts

General Electric’s largest business, the aviation segment is bound to return to pre-pandemic levels following the successful rollout of the covid-19 vaccine. The company’s airplane engine manufacturing business is tipped to peak again after a slowdown caused by country lockdowns and travel restrictions. Engine repairs could also help boost General Electric’s top line in the coming months.

Another catalyst for the shares of the Boston, MA-based company comes from the rapidly growing electric vehicles market. Generally, as the world continues to shift towards environmentally-friendly vehicles, the demand for electricity will rise. This will boost the revenue potential for the company. A Bloomberg report from last year predicted that electric vehicles will account for at least 58% of all passenger vehicles and 31% of all cars by the year 2040. 

The company’s nuclear energy unit, which it co-owns with Japan’s Hitachi, recently announced a new collaboration with Synthos in Poland for its small modular reactor (SMR) technology. This collaboration is expected to play a crucial role in addressing Poland’s energy challenges. In return, this will boost the unit’s revenue potential, while at the same time helping to popularize GE’s SMR technology.

General Electric should also see a significant increase in energy generation from its offshore wind turbine launched in April 2019. The Haliade-X is the most powerful offshore wind turbine in the world. The 13 MW Haliade-X turbines started shipping last year with 190 of them ordered by the UK-based Dogger Bank wind firm.

Therefore, General Electric appears to have several growth catalysts that could boost top-line potential in the coming years. The company’s multinational status makes it one of the quality stocks that anyone could own. When you add its growth potential, then it becomes clear why it is one of the stocks to watch going into the second quarter of the year.

General Electric GAAP annual revenue fell 16% last year to $79.6 billion while adjusted EPS was down 98% to $0.01. The stock price has since maintained an upward movement. This indicates that investors are looking further forward with high expectations for the year 2021. The disappointing top line and bottom line performances last year were primarily caused by covid-19. But now, it looks like we are getting closer to a return to normality, which will pave the way for improved performance by the company.

Conclusion

In summary, shares of General Electric appear to be attractively valued following the latest pullback. The company’s stock price performed considerably well over the last six months overshadowing a significant decline in the top line and the bottom line. With better results expected in the coming quarters, General Electric is one of the top stocks to watch as it targets another breakout.