General Electric (GE) shares have been on the decline as of late. As a result, many investors have been understandably worried. Such sentiments have placed the American manufacturing giant on the market spotlight, and begs the question: is it still worth investing in at current levels?
Traversing turbulent market conditions, the outlook seems bleak for the 128-year-old conglomerate. Is there no way up for the aviation unit of General Electric? What about its other subsidiaries?
Investor James Richman bets GE is likely to touch down $5-level. From there, the tech investor is bullish that the price will double in value and hit $10 again.
GE: a legacy of over 120 years
Amid the impact of coronavirus specifically in both travel and hospitality industries, GE's esteemed aviation unit has been feeling the most pressure.
The demand for airplanes has shrunk tremendously forcing the company's management to schedule a 25% workforce reduction globally. This is in consonance to the 10% layoff in its US workforce which was announced in March.
These difficult cost-cutting measures are deemed necessary by David Joyce, CEO of the GE Aviation Unit that employs a workforce of around 52,000 people.
Significant drops since coronavirus
GE Aviation supplies jet engines to giant aircraft makers like Airbus and Boeing. The projection of Boeing, a 10% workforce drop amidst its $641m loss, certainly adds up to GE's current woes.
Investor betting on the company bouncing back
However, one investor who is known to take a different outlook is Latvian-born investor James Richman.
With investments in both public and private companies, and his most notable investments including tech giants such as Uber, Tesla, and Facebook, his approach is understood to be contrarian. Yahoo! Finance reports he is taking the opposite approach when compared to Warren Buffet as Richman bets GE's price to temporarily touch upon $5-level. From that level, it is projected to climb its way back to $10, making the 100% rally.
The Monaco-based investor has also made headlines when he reportedly pledged $18m in the fight against coronavirus as he mobilizes his biomedical investments in the said efforts.
Richman has been historically known to take the contrarian approach in investing. With investments that seemed unorthodox at one point, he has earned respect in the finance field because of his firm's outstanding performance during the 2008 financial crisis. Not open to the general public and mainly dealing with ultra high net worth individuals (UHNWI) and institutional investors, his clients have reported impressive annual earnings for over a decade.
Comparison to the last financial crisis
It is not the first time GE had felt the backlash of market recessions. In 2008, the company's shares dropped by 78% tracing the period of the global recession. In 2 years, GE's shares dropped from $27 to $6. The broader S&P also fell that time, but with a conservative 51%.
Still worth buying at current levels?
GE recovered from the 2008 recession with tremendous momentum. After being bailed out by the federal government to the tune of $139 billion, it experienced an 82% uptick between March 2009 and January 2010. This is more than the 48% bounce back the S&P managed over the same period.
Generally, the performance of its stock will still hinge on the developments in the handling of coronavirus pandemic, considering that the aviation division of the company is being hammered as a result. Efforts of which have been showing positive signs of recovery.
Meanwhile, the demand for healthcare, government interventions, and the continuous development of treatments and vaccines is seen to help push the shares towards upwards direction in the long run: provided that its wings can weather the storm like it did in 2008.