Market value: $76.9 billion
TipRanks consensus price target: $9.81 (11% upside potential)
TipRanks consensus rating: Hold
Embattled multinational General Electric (GE, $8.81) looked like it was finally stabilizing for most of this year. However, a recent report alleging accounting fraud “bigger than Enron” – a controversial one that some analysts are skeptical about – rattled prices over the past month.
In August, investigator Harry Markopolos – the whistleblower that helped blow open Bernie Madoff’s Ponzi scheme – accused General Electric of accounting fraud worth $38 billion, which GE categorically denied. He alleges there are accounting issues in GE’s long-term care insurance unit and Baker Hughes oil-and-gas unit, among other points.
Deutsche Bank’s Nicole DeBlase is among the analysts who are skeptical about the report’s doomsday tone. “We find some of its arguments to be weak while others are plainly incorrect,” she writes, adding, “We find ourselves in the unenviable position of having to defend the reserve adequacy of a business about whose future claim projections we have very deep concerns.”
Still, General Electric has more problems than most large-cap stocks, with or without the report. Several analysts have GE among their stocks to sell as a result.
For instance, JPMorgan’s Stephen Tusa (Underweight, equivalent of Sell) described the company’s recent Q2 earnings report as “low quality.” He made the call despite GE’s earnings beat and instructed clients to sell into strength. Results reflect that “the company may have fewer options than many think, forcing a protracted, drawn-out approach to the problems, a negative given cycle timing, and at odds with the message of urgency from last fall,” he writes.
Gordon Haskett’s John Inch reiterated his Underperform rating (equivalent of Sell), calling the earnings “a modest step backward versus expectations.” Analysts also said the departure of CFO Jaime Miller, after less than two years in the role, is a worrying signal for investors. “We wonder about all these things, especially if things really are looking up, as management contends,” comments Gimme Credit analyst Carol Levenson, who also rates GE at Underperform.
And despite the 11% upside implied by the current consensus price target, recent ratings aren’t encouraging. Over the past three months, three analysts say GE is a Buy – while six say Hold and three more say Sell. Get the full scoop on General Electric’s analyst consensus at TipRanks.