General Electric stock 2021 forecast – have all the 2020 bears left yet?

General Electric’s stock (NYSE: GE) shapes up for a comeback as we enter 2021. However, claiming a 2021 bullish run is a bold claim. Because the GE stock is down 48% YTD. Nonetheless, today’s article will break down both sides of the 2021 argument for our readers and provide YIG’s take on a General Electric investment.

Table of contents 
1. General Electric stock 2021 forecast  
2. YIG's take on a General Electric investment

General Electric stock 2021 forecast

Bearish 2020 summary

Like most aviation, healthcare, and power companies, the bears took General Electric’s stock price to the woodshed in 2020. GE’s bearish 2020 decline is understandable. Because the low demand for flying, low priority for elective surgeries, and the lack of activity in the power industry crippled General Electric’s aviation, healthcare, and power segments. Consequently, GE’s financials deterred bullish investors. For example, GE reported a 38.4% fall in Q2 revenue and missed the consensus estimates. After disappointing Q2 results, investors went on a selling spree, ultimately triggering a 30% decrease in two months. However, all things must come to end, and it seems the bears took a rest with GE. Nonetheless, the question remains, will General Electric rise or fall from here?

Bullish 2021 outlook

Some investors are changing their tune as General Electric’s 2021 future is becoming brighter each day. (opinion not advice) The economic recovery is masqueraded as progress only because of vaccine optimism and the recent decrease in numbers. Businesses, especially General Electric, would not attempt to revert to pre-COVID-19 production if there was no hope.

A fast-tracked and readily available vaccine will significantly boost GE’s jet-fuel, healthcare, and power segments. Demand for flying would spike. Increased air travel would see more airplanes order GE parts. However, recovery in travel is likely to be gradual. Hence, the 2021 bullish argument is holding more weight than a sharp rebound in the upcoming weeks.

Moreover, rapid eradication of the virus would see hospitals return their focus towards elective and general surgeries. In which the demand for GE’s healthcare products would surge again. However, YIG would like to point out that GE’s bullish 2021 forecast will be nothing but a fantasy if COVID-19 rages on. Overall, an optimistic 2021 picture would generate positive earnings guidance, which would reel in value and fundamental investors.

Furthermore, parking aside the fundamental recovery, some investors champion the technical argument. Especially, as the extreme sell-off likely caused capitulation, in which the buyers would drive up GE. However, how does one pinpoint capitulation? Some investors use the relative strength index (RSI) and resistance levels. However, according to MarketSmith chart analysis, GE’s relative strength line is falling within a multi-year downtrend. MarketSmith’s research suggests true capitulation is not noticeable yet. Overall, GE’s 2021 projections will only come to fruition from a technical standpoint if the vaccine holds up.

Does YIG see value in a 2021 General Electric Investment?

Before I begin, I am obliged to remind our viewers that this is not financial advice but rather investment commentary from extensive research

Short answer: Both the bullish and bearish 2021 arguments hold weight. However, if a COVID-19 vaccine is produced, then the bulls will prevail. (opinion not advice) 

A General Electric 2021 reversal looks promising, as long as the vaccine hopes hold. It seems GE capitulation will only be noticeable once bearish investors believe in the COVID-19 story. Because if COVID-19 intensifies, then GE could continue down its bearish path. Not to mention that if uncertainty remains high, than volatility around GE would reduce, making it difficult for a volcanic rebound. The U.S election is around the corner, 3rd November. Consequently, uncertainty will be going nowhere. (opinion not advice) However, overall, GE looks bullish for 2021 as all their core business functions should normalise.

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The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.

Written by Patrick McLoughlin, Senior Manager of YIG.

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