Options & Future Only Highlight Positive GE Research Call (GE)

General Electric Co. (NYSE: GE) has seen at least some decent trading action today, despite the softness in the market.  The stock was reaffirmed as “Overweight” at JPMorgan, but the research call sounded much more positive than the same $17.00 price target.  The firm believes hot spots in the financial sector of its operations have been reduced mostly down to commercial real estate now.  The firm now sees this being a tailwind for earnings ahead.  According to OptionsHawk.com, there has been some substantial options trading activity around this as well.

Joe Kunkle of OptionsHawk noted , “Just saw a buyer of 131,500 January 2011 $22.50 calls for the 76 cent offer.  On the day 210,000 calls have traded, 1.5X average already, and just 22,000 puts, 0.25X average, showing the shift to bullish sentiment.  Other large purchases have been in January 2010 $17.50 and $21 calls.  Shares of GE are hitting highs on the day and near a bit of a breakout from recent resistance at $16.25, potentially looking to fill an October gap to $16.60.  This trade is looking for a whole lot more, though, possibly an inverse head and shoulders breakout at $17.50 that would imply a move to $28 by 2011.  The conglomerate may looks to sell parts to focus on it’s core business and trades 2.78X cash value, just 13X free cash flow.  The GE capital Portfolio is also seeing significant improvements and may be a big addition to it’s bottom line.  Implied volatility remains unchanged at 31%, near 52 week lows.”

Shares are up 1% at $16.18 today, and this would mark the highest close since the end of October as long as it closes above $16.09.  The 2009 to 2010 transition for GE and its revenues and earnings is also going to be a wild card.  Thomson Reuters is calling for $0.99 EPS in 20098 and $0.92 EPS in 2010, but on revenues of $154.99 billion in 2009 and $151.36 billion in 2010.

Taking that into consideration and considering that the NBC Universal deal is in the air and considering that GE was trying to unload its appliances unit a year and a half ago, all those estimates and the financial condition could be vastly different if the capital markets and if deal making continues to improve.

Jon C. Ogg
November 24, 2009