UBS analyst Steven Winoker, in his latest report, revealed that GE still holds value for long-term investors and also reiterated his Buy rating with the 12-month price target of $13.
Winoker admits that GE's primary concern is currently related to leverage. But he is optimistic that GE has plenty of levers to pull itself up and reduce its leverage down to a reasonable level in future, which in turn would create upside for the stock.
According to Winoker, GE might be able to lower its leverage to ~3x net debt by 2020 and ~2x net debt by 2022 – which might help in regaining investor confidence.
He further added that although it is difficult to predict at this moment what lies ahead, he expects GE to successfully divest its remaining stake in Baker Hughes (BHGE) in 2019 while relinquishing its stake in GE Healthcare by 2020, with 80% of the spin-off retained by GE shareholders.
Winoker expects the healthcare spin-off will take $18 billion in gross debt, while support from GE’s Industrial segments - in terms of shouldering the cash flow burden for paying GE Capital’s upcoming near-term debt obligations – might help the company reduce its total debt and improve valuations.