General electricity company (GE) is trading up more than 7% in Tuesday’s premarket despite missing Q4 2020 earnings per share (EPS) estimates $0.01 per share and guides fiscal 2021 well below consensus. The fallen industrial giant posted a profit of $0.08 per share on a 16.4% drop in year-over-year revenue to $21.93 billion. The news buying reaction reversed at the January high near $12, keeping a breakout scenario on the table past the opening bell.
Key points to remember
mountains of debt
The company cut its 2021 EPS guidance from $0.38 per share to a new range of just $0.15 to $0.25, reflecting reduced cash and earnings from legacy businesses sold in 2020. Shareholders took this to heart, hoping that lean operations will improve General Electric’s situation. growth trajectory as the company works through mountains of debt. However, GE Industrial’s revenues won’t help that goal, with growth forecast for 2021 in the “low single-digit range.”
General Electric has taken aggressive steps to strengthen its balance sheet over the past three months, engaging in partnerships, acquisitions and cost reduction initiatives that have reduced Pension $2.5 billion debt. The company reduced its total debt by approximately $14.5 billion in 2020 and $28 billion since the start of 2019. It also announced an SEC litigation settlement during the quarter and benefited from the return of the 737-MAX airliner in the air.
The Wall Street consensus on General Electric has shifted to “Overweight” over the past three months, with 14 “Buy” recommendations, 1 “Overweight” and 6 “Hold”. More importantly, no analyst is recommending shareholders to close positions and move to the sidelines. Price targets currently range from a low of $7.00 to a high of $21.00, while the stock is currently trading around $1.40 below the midpoint target of $13.00.
Debt charge is the total amount of debt carried by an individual, government or business. Publicly traded companies record their debt on their balance sheets, providing investors with an overview of what they own and owe each quarter.
General Electric monthly chart (2007–2021)
General Electric shares fell into single digits in 2009 and rose, entering a shallow uptrend that stalled in the $30s in 2016. This marked the second highest since 2007, signaling a downtrend to term that is still in effect, despite short-term increases. A wave of selling in 2017 gained momentum in the fourth quarter of 2018, dropping GE to a 10-year low at $6.40. He dug a two-legged recovery through February 2020 and turned around, cutting through 2019 Support in March.
Price action completed a potential double bottom in October and rose sharply, stopping around 1.5 points below the 2020 high in January 2021. The stock needs to breach this barrier to end the series of lowest highs since 2016 and establish an intermediate uptrend . The slight rise is also needed to confirm the reversal of the double bottom and trigger a wave of buying interest that could reach $20.
However, the 2020 high closely aligned with the 50-month low exponential moving average (EMA), marking a substantial barrier that will be difficult to overcome. The stock broke this support level nearly four years ago and still hasn’t tested any new ones. resistance. As a result, the reward-risk profile is not favorable for new entries here, especially with General Electric issuing a 2021 earnings warning. Even so, a pullback could provide a long-term buying opportunity for extremely patients.
The risk/reward ratio marks the reward potential investors can earn for every dollar they risk on an investment. Many investors use risk/reward ratios to compare expected returns of an investment with the level of risk they must assume to obtain those returns.
General Electric released a mixed report in the fourth quarter that is unlikely to generate the buying interest needed to break major resistance above $13.
Disclosure: The author held no position in the aforementioned titles at the time of publication.
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