Shares of General Electric Co. rose Friday toward a nine-month high, after BofA Securities analyst lifted his stock price target by 18%, amid a more upbeat outlook on the industrial conglomerate’s health care business as COVID-19 cases rise globally.
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GE’s stock has now run up 69.6% over the past three months, enough to make it the SPDR Industrial Select Sector exchange-traded fund’s XLI,
BofA’s Obin reiterated the buy rating he’s had on GE since January 29, and raised his price target to $ 13 from $ 11. The new target implies a 19.4% gain from current levels. The stock last closed above $ 13 on Feb. 12, which was about a month before the World Health Organization declared the COVID-19 outbreak a pandemic.
Obin’s more bullish view follows a presentation on Thursday by Kieran Murphy, who is chief executive officer of GE Healthcare. Murphy said he believed Healthcare will “close out a strong year here,” given COVID-related demand from ventilators and monitors, and as pharmaceutical diagnostics volumes returned in the fourth quarter.
“I would say, look, overall, we’re seeing a return to somewhat more stable markets, higher scan rates,” Murphy said, according to a transcript provided by GE. “Hospitals, don’t forget, are getting more and more resilient in terms of the way they’re setting up capacity to eat into the pent-up demand in oncology and cardiology, for example.”
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That led Obin to raise his overall 2020 earnings estimate for GE by a penny per share to 3 cents, and his 2021 EPS estimate to 35 cents from 34 cents.
“The recovery in pharmaceutical diagnostics (PDx) and ultrasound is continuing,” Obin wrote in a note to clients. “The outlook is also supported by backlog growth…and stable trends in scans/machines.”
The fact that GE Healthcare has noted some benefit from the COVID-19 pandemic may broaden the appeal for investors. The stock had been rallying ahead of GE’s third-quarter report in late October, as some analysts touted the company as being highly-levered to a COVID-19 vaccine, given its exposure to the aerospace sector.
Also read: GE stock rallies after analyst turns bullish on growing confidence in aviation recovery.
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But as Obin noted, COVID-19 has also accelerated the adoption of Edison, which is GE’s health care software platform.
