2020-04-02 • Updated
The historical chart of GE stock price leaves a mixed impression. First, we see that until the 1980-s it followed almost a flat curve in the area of $2 per share. Then, after 1981 it took a rising trend and transformed into exponential growth reaching an unseen $60 in the early 2000-s. After, it has been intermittently falling down to the area of $10 per share.
This price area is quite symbolic. In the middle of the 1990-s, this level was crossed on the way up before skyrocketing to the all-time high in 2000. Since then, the GE stock price dropped to that low only once – in 2009. Hence, the question is: is the story over, or we will see the established highs challenged ever once again?
GE stock price performance
In general, analysts explain the fall of the GE stock price after the year 2000 mostly with the same reasons they provide to its growth in the 1990-s.
Originally, GE had energy, aviation, and chemistry as the core fields of activity. Hence, these were the core sources of revenue.
In the 1980-s and 1990-s, the company management expanded the spectrum of the corporate interest far beyond those original fields, mostly into the financial sphere. At the same time, the company was consistent in avoiding any non-essential staff wage expenses throughout all those years. These tactics were the main drivers for company growth. In consequence, the stock value kept rising in line with the earnings per share.
The crashes of 2000-2002 and 2007-2008 in the stock price may be ascribed to the same sources that hit the entire industries and global economy during the respective crises. However, while the dramatic drops coincide for the GE and DJIA, the overall trends for the two are different. If GE stock price shows mostly a decline across the last 20 years, the Dow Jones has been growing despite all odds in the same period. In addition to that, the drop in 2017 is GE’s performance alone; in fact, that is one of the indirect reasons why the company was finally excluded from the DJIA.
Therefore, we have to conclude that the external storms only worsened the situation for the GE but were not the original reason for the company’s lamentable performance.
Dow Jones Industrial Average performance
On the industry side, the GE management has pointed out multiple times that their vision for the nearest future is to strip the company off of the unnecessary fields of activity and get back to the core industries. On the financial side, stringent measures are applied to reduce the debt pressure and move to the lighter financial model. Both these problems were a methodological consequence of the booming expansion routes of the previous decades and have been major contributors to the company stock price fall. And finally, these are being dealt with. But will that be enough to put the company back on the track?
Currently, the GE stock price is showing the best results since the end of 2018. Taking into account the gloomy picture of the past, this is not bad. However, analysts admit that they cannot pick any specific reason for this upward trend, even with the strategic development directions previously announced by the company management. That means that the market “does not believe” the company yet. More specifically, more time is needed to convince the observers that the improvement measures by the GE management will bring consistent positive results.
The weekly chart shows that the stock price has slowly moved above the 50-week and 100-week Moving Average, and the former is aiming upwards to cross the latter. For a long-term investor, that would be a preliminary sign to prepare for buying in the future. Hence, a reasonable recommendation in line with analysts’ observations would be to hold for more confirmations of the upward trend. The coming reports of GE will help in this verification. If the economic environment is favorable, the stock price may well challenge the October-2018 high of $13.40. If that is done, we may consider 2019 as a base for the price reversal to challenge the 2016-2018 downward trend.
As you can see, the knowledge of fundamentals is crucial in trading stock of a particular company, because it doesn’t always follow the industry or global trends. However, the general stock market dynamics and technicalities are as important.
To trade GE, you need to:
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Hello again my friends, it’s time for another episode of “What to Trade,” this time, for the month of April. As usual, I present to you some of my most anticipated trade ideas for the month of April, according to my technical analysis style. I therefore encourage you to do your due diligence, as always, and manage your risks appropriately.
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