GE shares rise after new analyst at UBS gives stock a buy rating and predicts a big 2020 rebound

Key Points
  • A new UBS analyst assumed coverage of GE, giving the industrial conglomerate a buy rating in his first note to investors.
  • "We believe the stock is at a positive inflection point into 2020," UBS analyst Markus Mittermaier said.
  • The previous UBS analyst had a neutral rating.
A General Electric (GE) sign is seen at the second China International Import Expo (CIIE) in Shanghai, China November 6, 2019.
Aly Song | Reuters

General Electric shares rose after a new analyst at UBS assumed coverage on the troubled conglomerate with a buy rating.

"We believe the stock is at a positive inflection point into 2020," UBS analyst Markus Mittermaier said in note to investors.

The buy rating represents an upgrade in the firm's opinion of GE, as the previous analyst had a neutral rating.

GE shares rose 4.3% in trading on Thursday to close at $11.44. UBS' price target, raised to $14 a share from $11.50 a share, represent a 26% climb from GE's current levels.

"We question the depth of which consensus captures the ongoing GE evolution," Mittermaier said. "Analyzing GE is not trivial and requires a detailed segment level analysis. This is what we have done. Our view is based on a multitude of proprietary data."

Mittermaier sums up the conclusions of the UBS deep dive in three parts: GE successfully de-levered, will see strong earnings growth of 12% and 29% respectively in 2020 and 2021, and industrial free cash flow will triple to about $2.3 billion next year, led by GE's aviation and healthcare units.

"We expect the stock narrative to change from significant cash drag to successful transformation," Mittermaier said.

While GE's stock has had a strong year, up more than 50% year-to-date, buy ratings like this one are still a bit difficult to come by for the industrial conglomerate. According to TipRanks, the firm has eight buy ratings – compared to twelve hold or sell ratings.

– CNBC's Michael Bloom contributed to this report.