Despite speculation that General Electric's* financial arm could need additional capital down the road, the company's shares have the potential to double over a three-year period, said Jack De Gan, CIO of Harbor Advisory Portsmouth.
"They are shrinking the balance sheet at GE Capital much faster than anticipated at the last deep-dive meeting, which is, I think, the reason the shares are up today," De Gan said.
The company's immediate future holds risk, though, particularly because of its real estate portfolio, De Gan said. GE has $5 billion in unrealized losses that it expects to absorb through earnings over the next three years, but if the market doesn't recover, this might not be possible.
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"If, in fact, the commerical real estate market gets more challenging, which we expect, then that unrealized loss could overwhelm earnings," he said. "A further weakening in the economy would probably drive the stock into the single digits."
But De Gan said he thinks this risk has already been factored into the stock's price. As a result, someone choosing to invest in the company for the long term could see its shares head toward the $30 mark.
GE Capital recently announced that it expects similar losses in 2010. However, the financial unit told an investor meeting on Tuesday that it would not need to raise new capital.
"We're fairly close to where we thought we would be with the base case," GE Capital CEO Mike Neal told the investor gathering.
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*General Electric is the parent company of CNBC.
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Disclosures:
Disclosure information was not available for De Gan or his company.
