General Electric Shares ‘Unlikely to Work in Short Term’ – Morgan Stanley

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Morgan Stanley analyst Joshua Pokrzywinski cut the price target on General Electric (NYSE:GE) shares to $95 from $100 while maintaining an Overweight rating.

Still, the analyst urged clients to “avoid shares in front of 2Q earnings as 2H expectations need to come down.”

While Pokrzywinski acknowledges that shares have already priced in a slower improvement in Health care supply chain and Renewables’ profitability, he still doesn’t see GE shares “working in the short-term.”

“We believe GE has an undemanding valuation and a set of businesses that are generally more recession resistant relative to industrial production, consumer/residential spending, and inventory destocking. This still leaves a catalyst path and a swing to positive earnings revisions to refocus investors on attractive valuation. We believe 2Q earnings will lower expectations, particularly on supply chain (Aviation and Healthcare) and medium term margins in Renewables,” Pokrzywinski wrote in a note.

“As we expect negative revisions to be fairly limited across industrials this quarter as the real economy has not yet caught up to stock performance, GE will likely stand out to the negative. Once this catalyst has passed, we believe shares can start to work and see an attractive bull/bear spread of 3:1 over the next year.”

GE shares are down roughly 35% YTD.