Shares of General Electric Co. rallied Tuesday toward their first gain in four trading days, after two Wall Street analysts raised their price targets by more than 40%, both on upbeat macro outlooks for 2021.
Morgan Stanley analyst Joshua Pokrzywinski reiterated his overweight rating on GE, but bumped up his price target by 41% to $12, which is 8.1% above current levels, from $8.50.
Referring to the outlook for recoveries next year in multi-industrial companies, Pokrzywinski said, “This time is different.”
He said trying to compare 2021 to the past 10 years of deflationary activity in the industrial capacity base appear to miss the shifts that are taking place.
“We believe the trifecta of tariffs, COVID and increasing [environment, social and governance] pressures have significant bearing on the magnitude and mix of investment in this recovery, particularly when enabled by technology,” Pokrzywinski wrote in a note to clients.
“Capex spending intentions are roaring back post-COVID and manufacturing technology investment is proving to be less cyclical,” he wrote.
Meanwhile, Deutsche Bank’s Nicole DeBlase kept her rating on GE at hold, but boosted her price target by 44% to $13, which is 17.1% above current levels, from $9, saying she’s “cautiously optimistic” regarding next year’s macroeconomic outlook.
DeBlase said her 2021 view considers the continued surge in COVID-19 cases of late, the efficacy and distribution of a vaccine, the balance of power in the U.S. government and the potential for U.S./China trade tensions to moderate.
She wrote in a research note that 2021 is estimated to be a year of “significant global industrial production recovery,” with Deutsche Bank economists expecting 10% year-over-year growth in industrial production. That growth outlook might seem optimistic, but it “makes sense given very easy [comparisons with last year] and based on what we’ve seen in past recoveries,” DeBlase wrote.
GE’s stock, which closed at a near 10-month high of $11.39 on Dec. 9, has run up 81.9% over the past three months, making it the best performer among the SPDR Industrial Select Sector exchange-traded fund’s components over the same time. In comparison, the industrial ETF XLI, +1.39% has gained 13.1% the past three months and the S&P 500 index SPX, +1.29% has tacked on 8.6%.