General Electric — the longest-tenured member of the Dow Jones industrial average and for decades a bellwether of the American economy and stock market — has taken its investors on a round trip to one of the darkest days in financial history.
With its relentless decline this year below $24, the stock is now trading below its closing price on the day Lehman Brothers filed for bankruptcy, Sept. 15, 2008. That was the day the financial system began to seize up and ultimately threatened the ability even of GE — long a triple-A rated corporate borrower — to access the capital markets and cover its bills.
Sure, GE stock melted down from that day through the early months of 2009, when it briefly traded beneath $6. Since the ultimate bear-market bottom on March 9, 2009, GE stock has climbed 14.7 percent annualized, solidly below the S&P 500's 16.4 percent annual gain. Including dividends, GE has lagged by about 0.7 percentage points per year, but the shares have been dead money the last three years.
Over that span, GE has exited the financial business as it rejiggered its corporate portfolio. Critics argue the company has made poor capital-allocation decisions under recently retired CEO Jeff Immelt, perhaps overpaying for some health-care and power-generation businesses while entering the energy industry just after its peak, with the purchase of Baker Hughes.
This week, JPMorgan analyst Stephen Tusa reiterated his negative underweight rating on the stock and set a new $22 price target, arguing that new CEO John Flannery would soon "reset" earnings expectations "to a lower number off of which future growth is uncertain and realistically below average." He further suggested the $24 share-price level could act as a ceiling, and that "investable fair value" might be a price "in the high teens."
The stock, already disliked by Wall Street and largely held by retail investors, would sport a dividend yield above 5 percent if it traded down to $19, assuming no change in the company's payout level. If so, GE shares would truly have sunk to a level with such a high dividend yield that it typically reflects fears of a company's structural decline or negligible long-term growth potential.