One major bull case for owning GE just flew out the window

Did one major reason for owning GE just fly out the window?

As General Electric shares continued making new lows ahead of its widely anticipated shareholder meeting on Monday, bulls clung to the notion of a potential breakup of the company as a reason to own the stock. But that argument may not work out, according to one widely followed analyst.

GE shares were slightly higher in premarket trading Monday after the conglomerate slashed its dividend by 50 percent and the Wall Street Journal reported new CEO John Flannery will restructure GE to focus just on the aviation, power and health-care divisions. The company will look to exit operations unrelated to those three units, the report said.

The company's investor day gets underway at 9am ET.

In a recent note from Cowen, analyst Gautam Khanna wrote that a sum-of-the-parts analysis of GE suggests its breakup valuation is in the range of $11 to $15 per share, implying between 27 and 46 percent downside to the stock's current value even after this potential restructuring.

Khanna argues that investors are failing to consider some of the debt-like liabilities that would need to be ascribed to those individual units, if a breakup were to occur.

"A major difference in our analysis vs. GE bulls who argue for [sum of the parts] upside is that we penalize GE's enterprise value for debt-like items (underfunded pension; GE Capital's net debt) that would be ascribed to assets if sold," wrote Khanna.

Shares of GE have tumbled 35 percent this year, shedding over $416 billion in market value since topping out in August 2000.

"There is no quick fix for GE and the stock remains biased to the downside," Khanna added.

The company's investor day is likely to be a market-moving event, according to Stacey Gilbert, head of derivatives strategy at Susquehanna, who said Friday on CNBC's "Trading Nation" that the options market is implying a dividend cut ahead.

Other investors have pointed to the company's considerable dividend as reason to own the stock. GE's dividend yield was 4.69 percent, compared with the S&P 500's dividend yield of 1.94 percent. Now that's been cut in half.

While there are many reasons shareholders should expect to get "excess yield" from holding GE, Gilbert said, "it's a really difficult company to own and justify, particularly as it continues to go down."

Prices for puts and calls for GE shares implied a dividend cut between 30 and 50 percent, according to Gilbert so Monday's move should come as no surprise.

The options market is implying 5 percent move in either direction for the stock on the back of the investor day Monday.

That's a substantial implied move for its investor day, she said, "so this really is a big deal. The world is watching, trying to figure out exactly what's going to happen with GE."

In late October, new CEO John Flannery declined to say whether the company would cut its dividend.

"From a philosophy perspective, we manage for total shareholder return. So it's going to be a mix of capital that goes into a dividend, and a mix that goes into organic and inorganic investment, and that has to be balanced," Flannery told CNBC's David Faber.

Investors will get their answer on Monday.

Disclosure: Stacey Gilbert personally owns shares of General Electric.