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General Electric shares rise sharply but the business of the company is still under the pressure

General Electric (NYSE: GE) shares have advanced more than 50% since the beginning of October, mainly on speculation of what a vaccine could mean for GE’s aviation business. In less than several weeks, the price of the stock has advanced from $6.27 above $10 and the current price stands around $9.7.

Fundamental analysis: Revenues from the aviation segment have decreased by 38% in Q3

General Electric (GE) is an American company that operates through the following segments: healthcare, power, aviation, renewable energy, digital industry, additive manufacturing and finance. The price of the stock has weakened more than 60% since the 2016 year as the company continues to have a fall in revenues.


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It is also important to say that General Electric had a loss in 2017, 2018 and 2019 year. Despite this, the business of the company is not compromised and General Electric’s size will always attract potential investors.

General Electric had a 17% Y/Y decrease in revenues in Q3 but adjusted Q3 EPS came in at $0.06 (down from the $0.15 in 2019). Revenues from the aviation segment have decreased by 38% mainly due to the Covid-19 pandemic while revenues from Power and Renewable Energy have increased.

Positive information is that General Electric reduced debt by $2.6B in Q3 and the company expects to improve this even more in the fourth quarter.

“We are managing through a still-difficult environment with better operational execution across our businesses, and we are on track with our cost and cash actions. We are improving our profit and cash performance with organic margin expansion in every segment except Aviation,” said CEO Lawrence Culp.

COVID-19 cases in the US continue to rise and the US reported over 198K new cases in one day. The next year will be competitive for General Electric but the aviation segment is expected to benefit once the economy reopens.

The business of the company is still under the pressure and maybe now is not the best moment for buying General Electric shares. This stock is still risky in my opinion and the price of General Electric shares could weaken again.

Technical analysis: Bulls are focused on breaking the resistance level at $10

General Electric shares have been moving in the downtrend last several years but the price of this stock has seen a significant rise in the last forty days. In less than several weeks, the price of the stock has advanced from $6.27 above $10 and the current price stands around $9.7.

Data source: tradingview.com

The current support levels are $9 and $8, $10 and $11 represent the current resistance levels. Rising above $11 supports the continuation of the bullish trend for General Electric shares but if the price falls below $8 it would be a strong “sell” signal.

Summary

General Electric shares have advanced due to promising COVID-19 vaccines but this stock is still risky in my opinion. General Electric had a 17% Y/Y decrease in revenues in Q3 and the business of the company is still under the pressure. Revenues from the aviation segment have decreased by 38% mainly due to the Covid-19 pandemic while revenues from Power and Renewable Energy have increased.

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