General Electric (GE) stock opened lower on Monday and went on to touch a new yearly low of $11.60, which is also the company’s lowest in nine years. A recent gas turbine failure in Texas showed concerns among the investors on how GE power business is going to perform in the near future.
The stock had reached a record low of below $12 on August 15 this year, but it gained 6% by August-end. Since the past year, the shares have shown a consistent drop in the level. The stock has fallen more than 32% for the year so far.
Investors who bought General Electric shares a year ago at $24.92 are now set to get a rough return of down 52%. At the beginning of July, JPMorgan has suggested shareholders sell the company’s shares as they are still significantly overvalued. The firm believed the company’s strategy would not lead to a higher stock price.
In the recent second-quarter, General Electric’s earnings plunged 30% due to a provision for income taxes. Revenue rose 3%, helped by strong performance from its oil & gas, healthcare and aviation segments. Meanwhile, orders softness, a decline in wind turbine orders, and sale of the majority of lighting businesses have hurt revenue from power, renewable energy, and lighting.
The company had expected the power market to remain challenging. General Electric had plans for separating GE Healthcare into a standalone company over 12 to 18 months, pursue the orderly separation of BHGE over 2 to 3 years and combine GE Transportation with Wabtec.
During early August, General Electric had a pact to divest its power-conversion segment but it was sold for half the price. The company was experiencing lousy results from the divestitures for liquidity stabilization.
The struggling power business has prompted most of the Wall Street analysts to lower price targets on General Electric stock this month. Most of them suggested aggressive and intense cost reductions for General Electric to regain in the market. A JPMorgan analyst told CNBC that General Electric is expected to lower its dividend in the future.
The stock ended Monday’s regular session down 3.53% at $11.74. The stock is likely to rebound as the company does have opportunities to improve its performance over the long-term.