Categories Industrials

General Electric shares bounce back after rating upgrade, IoT venture

General Electric (GE) has reached a pivotal point in its aggressive restructuring program, marked by the divestment of loss-making business units, amid mounting losses and operational lapses. After several months of volatility, there are indications that the company is on the revival path.

GE got a major boost from an unexpected rating upgrade by JPMorgan Thursday, coinciding with the management’s announcement about its ambitious move to spin off GE Digital into an independent Internet of Things (IoT) company. As part of the initiative, a majority stake in Service Max, the tech firm that joined the fold of GE Digital two years ago, will be sold to a private equity firm.

A majority stake in Service Max, the tech firm that joined the fold of GE Digital two years ago, will be sold to a private equity firm

After maintaining the underweight tag on GE for more than two years, JPMorgan raised its rating to neutral, citing a “more balanced risk reward,” but retained the $6 price target.

Meanwhile, GE’s stock surged more than 10% in early trading, marking the biggest intraday gain in nearly five years. The company’s market value had more than halved over the past twelve months. Currently, the stock is trading just above $7. At one point, the performance was so dismal that the stock was removed from the Dow Jones index.

The spin-off complements the industrial conglomerate’s efforts to realign its business and stay relevant by focusing more on the latest technology. The new entity is expected to generate $1.2 billion in annual revenue, combining GE Digital’s portfolio of industrial IoT technology and the software solutions business of GE Power.

It will engage with all the core businesses of GE and is expected to create significant value for shareholders. Being a late starter, however, the new business will have to fiercely compete with industry leaders like Microsoft (MSF) and Amazon (AMZN) to gain market share.

What to expect from General Electric going into 2019

While the GE management has taken several measures to tackle the ongoing financial crisis, the latest initiative could become a major driving force behind the company’s much-needed turnaround, in the long term. Since GE Digital’s head Bill Ruh has left the company, a new CEO will be leading the IoT brand, which will have an independent equity structure and board of directors.

 

Listen to publicly listed companies’ earnings conference calls along with the edited closed caption text

Most Popular

Does Unity Software (U) stock has more room to run?

Last month, the IPO market was in a full swing. IPOs of Snowflake (NYSE: SNOW) and JFROG (NASDAQ: FROG) had an impressive opening day in September, the former creating a

PepsiCo (PEP): Steady snacking habits amid pandemic drive strong quarter for beverage giant

PepsiCo Inc. (NASDAQ: PEP) beat market expectations on both revenue and earnings for the third quarter of 2020. The company saw the momentum continue in its snacks business while the

Does the virus-driven boom make Electronic Arts (EA) a good investment?

With more and more people turning to virtual entertainment sources, amid the virus-related movement restrictions, video game publishers like Electronic Arts (NASDAQ: EA) are witnessing unusually high demand. Not surprisingly,

Leave a Reply

Your email address will not be published. Required fields are marked *

Add Comment
Loading...

Cancel
Viewing Highlight
Loading...
Highlight
Close
Top