Lehman Runs the GE Value Gauntlet (GE)

General Electric Co. (NYSE: GE) is seeing a rise of nearly 1% today, and this is after several days of hitting the 52-week low list and almost seeing its stock trade with $25 handles for the first time in five years. 

Lehman has come out defending the stock saying shares could be near a bottom.  The research noted that it is rather cheap comparatively when you factor in current concerns over its financial service business all the way back to the 1989 to 1992 period.  It noted that similar concerns over exposure to leveraged buyout and real estate lending pushed shares to a 25% discount to the S&P500 at that point, and GE is currently trading at an 18% discount to the S&P500.

What is more interesting about this call than the "relative valuation" being close to a trough is that Lehman notes that there is a potential GE could trade at a premium again.  It even throws out a 20% after its returns to the double-digit earnings growth that its expects over the long term.

Lehman has also noted that it thinks the sale of GE’s US private label credit card business could get done this year at a solid price.  Whether or not that occurs, well that is a different animal all together.  But there have been many trying to figure out which units GE will jettison.

Regardless of which units get kept and which get punted, the GE of tomorrow is looking like a far cry from your father’s GE.  Many have tried defending GE all the way down.  Shares have literally come off almost 40% from their highs.  Whether or not this marks the true bottom won’t be known, but someone will eventually be right there.

Jon C. Ogg
June 30, 2008