J.P. Morgan warned General Electric shareholders that the industrial conglomerate's turnaround strategy will not lead to a higher stock price.
The firm reiterated its underweight rating for GE shares, citing the company’s high valuation.
Last week the company announced plans to spin off its health-care unit and separate its stake in oil services company Baker Hughes over the next two to three years. GE said it will focus its operations on the aviation, power and renewable energy businesses. Its shares rose 7.8 percent on the day of the announcement Tuesday.
"2019 promising to be another ‘transition year,’ with heavy restructuring and little relief at Power, on which implied multiples show significant disconnect vs peers, particularly on cash metrics," analyst Stephen Tusa said in a note Monday to clients entitled "It’s Not That Complicated: Simplified SOTP [sum of the parts valuation] Suggests Remainco GE Significantly Overvalued.”
"Perhaps not well understood is that 2019 is shaping up to be much like 2018, with management now messaging no decline in cash restructuring and only a modest decline in book restructuring," he added.